“When workers already have a large quantity of capital to use in producing goods and
services, giving them an additional unit of capital increases their productivity only
slightly.” This statement
a. represents an unconventional view of the production process.
b. is an assertion that capital is subject to increasing returns.
c. is made under the assumption that the quantities of human capital, natural resources,
and technology are being held constant.
d. All of the above are correct.
All else equal, which of the following would increase the unemployment rate?
(i) an increase in the number of women who return to work after being stay-at-home
mothers
(ii) a preference among older men to retire early
(iii) an increase in the maximum number of weeks for which someone can receive
government unemployment benefits
(iv) an increase in the number of previously unemployed women who stop looking for
work and become discouraged workers
a. (i) and (ii) only
b. (iii) only
c. (ii) and (iii) only
d. (ii), (iii), and (iv) only
According to the Philips curve diagram, if a central bank takes action to reduce the
inflation rate, unemployment is
a. higher in the short-run and the long-run.
b. higher in the short-run only.
c. lower in the short-run and the long-run.
d. lower in the short-run only.
Monetary Policy in Mokania
Mokania has had inflation of 15% for many years. Mokania establishes a new central
bank, the Bank of Mokania, with the hopes of reducing the inflation rate.
Refer to MonetaryPolicyinMokania. The Bank of Mokania publicizes its intent to
reduce the inflation rate to 5%. If it is successful in doing so but people had expected
inflation to fall only to 10%, then
a. unemployment rises but it would have risen by more if people had expected inflation
to be 6%.
b. unemployment rises but it would have risen by less if people had expected inflation
to be 6%.
c. unemployment falls but it would have fallen by more if people had expected inflation
to be 6%.
d. unemployment falls but it would have fallen by less if people had expected inflation
to be 6%.
The Kennedy tax cut of 1964 was
a. successful in stimulating the economy.
b. designed to shift the aggregate demand curve to the right.
c. designed to shift the aggregate supply curve to the right.
d. All of the above are correct.
A market’s equilibrium is the point at which the supply and demand curves intersect.
a. True
b. False
Which of the following is an example of U.S. foreign direct investment?
a. A Chinese company opens a restaurant in the U.S.
b. An Australian bank buys stocks issued by a U.S. corporation.
c. A U.S. bank buys bonds issued by an Australian corporation.
d. A U.S. company opens an auto parts factory in Canada.
GDP is the market value of all final goods and services produced within a country in a
given period of time.
a. True
b. False
Assume an economy experienced a positive rate of inflation between 2003 and 2004
and again between 2004 and 2005. However, the inflation rate was lower between 2004
and 2005 than it was between 2003 and 2004. Which of the following scenarios is
consistent with this assumption?
a. The CPI was 100 in 2003, 110 in 2004, and 105 in 2005.
b. The CPI was 100 in 2003, 120 in 2004, and 135 in 2005.
c. The CPI was 100 in 2003, 105 in 2004, and 130 in 2005.
d. The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.
Advocates of government-run employment agencies and public training programs
believe they make job search more efficient.
a. True
b. False
If the value of an economy’s imports exceeds the value of that economy’s exports, then
net exports is a negative number.
a. True
b. False
A high-ranking corporate official of a well-known company is unexpectedly sentenced
to prison for criminal activity in trading stocks. This should
a. raise the price and raise the present value of the corporation’s stock.
b. raise the price and lower the present value of the corporation’s stock.
c. lower the price and raise the present value of the corporation’s stock.
d. lower the price and lower the present value of the corporation’s stock.
For monitoring fluctuations in the national economy, which measure of income is best?
a. GDP
b. GNP
c. NNP
d. It does not matter very much which measure we use.
If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the
following is correct?
a. The U.S. has a trade surplus of $350 billion.
b. The U.S. has a trade surplus of $50 billion.
c. The U.S. has a trade deficit of $350 billion.
d. The U.S. has a trade deficit of $50 billion.
To say that government intervenes in the economy to promote equality is to say that
government is aiming to
a. create a more fair distribution of income.
b. change the ingredients that are used to “bake” the economic pie.
c. enlarge the economic pie.
d. All of the above are correct.
If the actual price level is 165, but people had been expecting it to be 160, then
a. the quantity of output supplied rises, but only in the short run.
b. the quantity of output supplied rises in the short run and the long run.
c. the quantity of output supplied falls, but only in the short run.
d. the quantity of output supplied falls in the short run and the long run.
Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer’s basket
consists of 4 pounds of pork and 3 bushels of corn.
RefertoTable24-3. If 2012 is the base year, then the CPI for 2012 was
a. 75.3.
b. 100.0.
c. 116.0.
d. 132.8.
The slope of a line passing through the points (15, 3) and (10, 6) is
a. -3/5.
b. 3/5.
c. -5/3.
d. 5/3.
While the production possibilities frontier is a useful model, it cannot be used to
illustrate economic growth.
a. True
b. False
If the stock market crashes, then
a. aggregate demand increases, which the Fed could offset by increasing the money
supply.
b. aggregate demand increases, which the Fed could offset by decreasing the money
supply.
c. aggregate demand decreases, which the Fed could offset by increasing the money
supply.
d. aggregate demand decreases, which the Fed could offset by decreasing the money
supply.
According to liquidity preference theory, an increase in the price level shifts the
a. money demand curve rightward, so the interest rate increases.
b. money demand curve rightward, so the interest rate decreases.
c. money demand curve leftward, so the interest rate decreases.
d. money demand curve leftward, so the interest rate increases.
If M= 9,000, P= 6, and Y= 1,500, what is velocity?
a. 0.167.
b. 1.
c. 4.
d. 36.
If purchasing-power parity holds, the price level in the U.S. is 140, and the price level
in Canada is 120, which of the following is true?
a. the real exchange rate is 120/140.
b. the real exchange rate is 140/120.
c. the nominal exchange rate is 120/140
d. the nominal exchange rate is 140/120
In 2009, government purchases was the largest component of U.S. GDP.
a. True
b. False
For the economy as a whole,
a. income must be greater than expenditure.
b. unemployment must rise when GDP rises.
c. expenditure must equal income.
d. consumption must be greater than investment.
A change in the expected price level is likely to cause which of the following?
a. a shift in the short-run aggregate supply curve and long-run aggregate supply curve
b. a shift in the short run aggregate supply curve
c. a shift in the aggregate demand curve
d. a shift in the long-run aggregate supply curve
Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate
sometimes is close to zero.
a. True
b. False
The classical dichotomy is useful for analyzing the economy because in the long run
nominal variables are heavily influenced by developments in the monetary system, and
real variables are not.
a. True
b. False
In the long run, a decrease in the money supply growth rate
a. reduces expected inflation so the long-run Phillips curve shifts left.
b. reduces expected inflation so the short-run Phillips curve shifts left.
c. Both A and B are correct.
d. None of the above is correct.
Which of the following statements about nominal GDP and real GDP is correct?
a. Nominal GDP is a better gauge of economic well-being than real GDP.
b. Real GDP is a better gauge of economic well-being than nominal GDP.
c. Real GDP and nominal GDP are equally good measures of economic well-being.
d. Neither nominal nor real GDP provide a measure of economic well-being.
Table 24-4
The table below pertains to Studious, an economy in which the typical consumer’s
basket consists of 5 books and 10 calculators.
RefertoTable24-4.The cost of the basket
a. increased from 2012 to 2013 and increased from 2013 to 2014.
b. increased from 2012 to 2013 and decreased from 2013 to 2014.
c. decreased from 2012 to 2013 and increased from 2013 to 2014.
d. decreased from 2012 to 2013 and decreased from 2013 to 2014.
In 1979, when the Fed was deciding how aggressively to fight inflation, the typical
estimate of the sacrifice ratio was
a. 1.
b. 5.
c. 7.
d. 10.
An outcome is said to be efficient if an economy is conserving the largest possible
quantity of its scarce resources while still meeting the basic needs of society.
a. True
b. False