Other things the same, an increase in the U.S. interest rate causes the quantity of
loanable funds supplied to
a. rise because net capital outflow and domestic investment rise.
b. rise because national saving rises.
c. fall because net capital outflow and domestic investment rise.
d. fall because national saving falls.
The CPI is a measure of the overall cost of the goods and services bought by
a. a typical firm.
b. the government.
c. a typical consumer.
d. All of the above are correct.
Which of the following is not correct?
a. The unemployment rate is an imperfect measure of a nation’s overall level of
economic well-being.
b. Most job search in the U.S. economy takes place without intervention by the
government.
c. Most economists agree that eliminating unemployment insurance would increase the
nation’s overall level of well-being.
d. Other things the same, countries that offer more generous and longer-lasting
unemployment insurance benefits are likely to have higher unemployment rates.
An advance in farm technology that results in an increased market supply is
a. good for farmers because it raises prices for their products but bad for consumers
because it raises prices consumers pay for food.
b. bad for farmers because total revenue will fall but good for consumers because prices
for food will fall.
c. good for farmers because it raises prices for their products and also good for
consumers because more output is available for consumption.
d. bad for farmers because total revenue will fall and bad for consumers because
farmers will raise the price of food to increase their total revenue.
Table 7-6
Refer to Table 7-6. You have four essentially identical extra tickets to the Midwest
Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows
the willingness to pay of the four potential buyers in the market for a ticket to the game.
You offer to sell the tickets for $325. How many tickets do you sell, and what is the
total consumer surplus in the market?
a. one ticket; $175
b. two tickets; $225
c. three tickets; $225
d. three tickets; $275
Which of the following games might a risk-averse person play?
a. a game where she has a 70 percent chance of winning $1 and a 30 percent chance of
losing $1
b. a game where she has a 60 percent chance of winning $100 and a 40 percent chance
of losing $100
c. a game where she has a 60 percent chance of winning $2 and a 40 percent chance of
losing $1
d. All of the above are correct.
An aide to a U.S. Congressman computes the effect on aggregate demand of a $20
billion tax cut. The actual increase in aggregate demand is less than the aide expected.
Which of the following errors in the aide’s computation would be consistent with an
overestimation of the impact on aggregate demand?
a. The actual MPC was larger than the MPC the aide used to compute the multiplier.
b. The aide thought the tax cut would be permanent, but the actual tax cut was
temporary.
c. The increase in income shifted money demand less than the aide had anticipated.
d. The increase in income resulted in investment rising more than the aide had
anticipated.
The amount of revenue a firm receives for the sale of its products minus its costs of
production as measured by its accountants is the firm’s
a. earnings.
b. retained earnings.
c. economic, or real, profit.
d. dividend.
Figure 2-7
Refer to Figure 2-7. In order to reach point L, the economy would have to
a. acquire more resources or experience a technological advance.
b. begin using its available resources more efficiently than it is currently using them.
c. shift resources away from the production of nails and toward production of hammers.
d. None of the above are correct; the economy will never be able to reach point L.
Which of the following statements is not valid when the market supply curve is
vertical?
a. Market quantity supplied does not change when the price changes.
b. Supply is perfectly inelastic.
c. An increase in market demand will increase the equilibrium quantity.
d. An increase in market demand will increase the equilibrium price.
Suppose the Federal Reserve increases bank reserves and banks lend out some of these
reserves, but at some point banks still have $5 million more they wish to lend out. If the
reserve requirement is 10 percent, how much more money can banks create if they lend
out the remaining amount?
a. $55 million
b. $50 million
c. $45 million
d. $40 million
Tonya put $250 into an account three years ago. The first year he earned 6 percent
interest, the second year 7 percent, and the third year 8 percent. About how about much
does Tonya have in her account now?
a. $302.50
b. $306.23
c. $308.67
d. $309.39
An open economy’s GDP is always given by
a. Y = C + I + G.
b. Y = C + I + G + T.
c. Y = C + I + G + S.
d. Y = C + I + G + NX.
When a tax on a good is enacted,
a. buyers and sellers share the burden of the tax regardless of whether the tax is levied
on buyers or on sellers.
b. buyers always bear the full burden of the tax.
c. sellers always bear the full burden of the tax.
d. sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full
burden of the tax if the tax is levied on them.
If there is a political business cycle and the Federal Reserve supports the incumbent,
then we should expect that prior to elections
a. interest rates and output would rise.
b. interest rates would rise and output would fall.
c. interest rates would fall and output would rise.
d. interest rates and output would fall.
Goods produced abroad and sold domestically are called
a. exports.
b. imports.
c. exchange rates.
d. opportunity costs.
Scenario 13-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $300; net exports = $100;
taxes = $230; private saving = $200; and national saving = $150.
Refer to Scenario 13-3. This economy’s government is running a
a. budget deficit of $50.
b. budget deficit of $80.
c. budget surplus of $50.
d. budget surplus of $80.
Table 11-2
The table below pertains to Iowan, an economy in which the typical consumer’s basket
consists of 3 pounds of pork and 4 bushels of corn.
Refer to Table 11-2. If 2009 is the base year, then the inflation rate in 2009 was
a. 26.5 percent.
b. 36.1 percent.
c. 39 percent.
d. 47 percent.
How is net national product (NNP) calculated?
a. Saving is added to the total income of a nation’s citizens.
b. Saving is added to the total income earned within a nation.
c. Depreciation losses are subtracted from the total income of a nation’s citizens.
d. Depreciation losses are subtracted from the total income earned within a nation.
Which of the following is not correct?
a. GNP equals net national product plus losses from depreciation.
b. For most countries, including the United States, GDP and GNP are nearly the same.
c. GDP and GNP typically move in opposite directions.
d. Personal income equals disposable personal income plus personal taxes plus certain
nontax payments.
Figure 22-7
Use this graph to answer the questions below.
Refer to figure 22-7. Suppose the economy starts at 5% unemployment and 3%
inflation and expected inflation remains at 3%. Which one of the following points could
the economy move to in the short run if the Federal Reserve pursues a more
expansionary monetary policy?
a. 7% unemployment and 1% inflation
b. 7% unemployment and 3% inflation
c. 3% unemployment and 5% inflation
d. 3% unemployment and 7% inflation
In a certain economy, when income is $200, consumer spending is $145. The value of
the multiplier for this economy is 6.25. It follows that, when income is $230, consumer
spending is
a. $166.75. For this economy, an initial impulse of $10 in consumer spending translates
into a $62.50 increase in aggregate demand.
b. $166.75. For this economy, an initial impulse of $10 in consumer spending translates
into a $66.75 increase in aggregate demand.
c. $170.20. For this economy, an initial impulse of $10 in consumer spending translates
into a $62.50 increase in aggregate demand.
d. $170.20. For this economy, an initial impulse of $10 in consumer spending translates
into a $70.20 increase in aggregate demand.
Figure 19-1
Refer to Figure 19-1. 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.
A tax on imported goods is called a(n)
a. excise tax.
b. tariff.
c. import quota.
d. None of the above is correct.
Other things the same, the aggregate quantity of goods demanded decreases if
a. real wealth falls.
b. the interest rate rises.
c. the dollar appreciates.
d. All of the above are correct.
Suppose that over the past year, the real interest rate was 5 percent and the inflation rate
was 3 percent. It follows that
a. the dollar value of savings increased at 5 percent, and the purchasing power of
savings increased at 2 percent.
b. the dollar value of savings increased at 5 percent, and the purchasing power of
savings increased at 8 percent.
c. the dollar value of savings increased at 8 percent, and the purchasing power of
savings increased at 2 percent.
d. the dollar value of savings increased at 8 percent, and the purchasing power of
savings increased at 5 percent.
Figure 13-4. On the horizontal axis of the graph, L represents the quantity of loanable
funds in billions of dollars.
Refer to Figure 13-4. Regard the position of the Supply curve as fixed, as on the graph.
If the real interest rate is 8 percent, the inflation rate is 3 percent, and the market for
loanable funds is in equilibrium, then the position of the demand-for-loanable-funds
curve must be
a. .
b. .
c. between and .
d. to the right of .
A closed economy does not
a. trade with other economies.
b. have free markets.
c. allow financial intermediation.
d. All of the above are correct.
People choose to hold a smaller quantity of money if
a. the interest rate rises, which causes the opportunity cost of holding money to rise.
b. the interest rate falls, which causes the opportunity cost of holding money to rise.
c. the interest rate rises, which causes the opportunity cost of holding money to fall.
d. the interest rate falls, which causes the opportunity cost of holding money to fall.
The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would
encourage people to increase the quantity of labor they supplied became known as
a. California economics.
b. welfare economics.
c. supply-side economics.
d. elasticity economics.
A tax affects
a. buyers only.
b. sellers only.
c. buyers and sellers only.
d. buyers, sellers, and the government.
Fluctuations in employment and output result from changes in
a. aggregate demand only.
b. aggregate supply only.
c. aggregate demand and aggregate supply.
d. neither aggregate demand nor aggregate supply.
People who are risk averse dislike bad outcomes more than they like comparable good
outcomes.
Over the past several decades in the United States, the labor-force participation rate of
women has increased and the labor-force participation rate of men had decreased.
Archie has a savings account at a bank. If he earns 6 percent interest on his account and
if there is deflation, then his purchasing power rises by more than 6 percent over the
course of a year.
In the open-economy macroeconomic model, other things the same, when a U.S.
resident imports a foreign good, the demand for dollars in the foreign-currency
exchange market decreases.
If real output grows at 3 percent per year and the inflation rate is 3 percent per year then
government debt can grow by 6 percent per year and not increase the ratio of debt to
income.
It is possible for a country without a lot of domestic natural resources to have a high
standard of living.
The natural rate of unemployment is closely associated with the short-run ups and
downs of economic activity.
Zora can produce 4 quilts in a week and she can produce 1 corporate website in a week.
Lou can produce 9 quilts in a week and he can produce 2 corporate websites in a week.
Zora has the comparative advantage in quilts and the absolute advantage in neither
good, while Lou has the comparative advantage in corporate websites and the absolute
advantage in both goods.
Suppose a presidential candidate promises to increase the government budget surplus
and claims that doing so will stop U.S. citizens from investing in foreign companies and
increase the value of the dollar. Evaluate this promise.
The nation of Aviana soon will abandon its no-trade policy and adopt a free-trade
policy. If the world price of goose meat is $3 per pound and the domestic price of goose
meat without trade is $2 per pound, then Aviana should export goose meat.
Someone who loses his job at a truck factory because the demand for trucks has fallen
and the demand for cars has risen, is structurally unemployed.
A newspaper’s classified ads are an example of a market.
To state that national saving is equal to investment, for a closed economy, is to state an
accounting identity.
When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that
country become worse off and sellers of shoes in that country become better off.
If consumption is $7000, exports are $600, government purchases are $2000,
government transfers are $900, imports are $800, and investment is $1000, then GDP is
$9,800.
If Argentina exports oranges to the rest of the world, Argentina’s producers of oranges
are worse off, and Argentina’s consumers of oranges are better off, as a result of trade.
In the markets for goods and services in the circular-flow diagram, households are
buyers and firms are sellers.
Minimum-wage laws dictate the lowest wage that firms may pay workers.