When computing the cost of the basket of goods and services purchased by a typical
consumer, which of the following changes from year to year?
a. the quantities of the goods and services purchased
b. the prices of the goods and services
c. the goods and services making up the basket
d. All of the above are correct.
Figure 4-21
RefertoFigure4-21.At a price of $16, there is a
a. surplus of 1 unit.
b. surplus of 3 units.
c. shortage of 1 unit.
d. shortage of 3 units.
Price changes from year to year are not proportional, and consumers respond to these
changes by altering their spending patterns. The problem this creates for inflation
calculations is called
a. deflation.
b. inflation.
c. unmeasured quality change.
d. substitution bias.
If a country’s net exports fall, then its net capital outflow falls by the same amount.
a. True
b. False
Suppose the interest rate is 8 percent. Consider three payment options.
1) $300 today.
2) $330 one year from today.
3) $360 two years from today.
Which of the following is correct?
a. 1 has the highest present value and 2 has the lowest.
b. 2 has the highest present value and 3 has the lowest.
c. 3 has the highest present value and 1 has the lowest.
d. None of the above is correct.
Which of the following is nota reason perfect competition is a useful simplification,
despite the diversity of market types we find in the world?
a. Perfectly competitive markets are the easiest to analyze because everyone
participating in the market takes the price as given by market conditions.
b. Some degree of competition is present in most markets.
c. There are many buyers and many sellers in all types of markets.
d. Many of the lessons that we learn by studying supply and demand under perfect
competition apply in more complicated markets as well.
Historically the return on stocks has been higher than the return on bonds. In part this
reflects the higher risk from holding stock.
a. True
b. False
As of 2010, using real GDP per person as a measure, we would classify
a. the United States and Mexico as advanced economies and Bangladesh as a
middle-income country.
b. Canada as an advanced economy, Mexico as a middle-income country, and Pakistan
as a poor country.
c. Japan and India as advanced economies and Mexico as a poor country.
d. Japan as an advanced economy, the United Kingdom as a middle-income country,
and Argentina as a poor country.
U.S. laws requiring that drivers wear seat belts have resulted in
a. a reduction in both driver deaths and pedestrian deaths.
b. fewer accidents and fewer deaths per accident.
c. fewer driver deaths, fewer accidents and fewer pedestrian deaths.
d. little change in the number of driver deaths, but more accidents and more pedestrian
deaths.
When economists refer to investment, they mean the purchasing of stocks and bonds
and other types of saving.
a. True
b. False
Other things the same, if banks decide to hold a smaller part of their deposits as excess
reserves, the money supply will fall.
a. True
b. False
Three possible reasons for an above-equilibrium wage are minimum-wage laws, unions,
and efficiency wages.
a. True
b. False
Which, if any, of the present values below are correctly computed?
a. A payment of $1,000 to be received one year from today, with a 8 percent interest
rate, has a present value of $945.45.
b. A payment of $1,000 to be received one year from today, with a 9 percent interest
rate, has a present value of $911.11.
c. A payment of $1,000 to be received one year from today, with a 10 percent interest
rate, has a present value of $905.06.
d. None of the above are correct to the nearest cent.
Shifts in the aggregate-demand curve can cause fluctuations in
a. neither the level of output nor the level of prices.
b. the level of output, but not in the level of prices.
c. the level of prices, but not in the level of output.
d. the level of output and in the level of prices.
Real GDP per person tells us the income and expenditure of the average person in the
economy.
a. True
b. False
Of Social Security benefits and federal income tax brackets, which is indexed?
a. Both are indexed.
b. Only Social Security benefits are indexed.
c. Only federal income tax brackets are indexed.
d. Neither is indexed.
In the open-economy macroeconomic model, the source of the supply of loanable funds
is
a. personal saving
b. public saving
c. public saving + personal saving
d. public saving + personal saving + net capital outflows
If the unemployment rate rises, which policies would be appropriate to reduce it?
a. increase the money supply, increase taxes
b. increase the money supply, cut taxes
c. decrease the money supply, increase taxes
d. decrease the money supply, cut taxes
The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As
a result,
a. U.S. government purchases increase by $30,000; U.S. net exports decrease by
$30,000; and U.S. GDP is unaffected.
b. U.S. government purchases increase by $30,000; U.S. net exports are unaffected; and
U.S. GDP increases by $30,000.
c. U.S. government purchases, net exports, and GDP are unaffected.
d. U.S. government purchases are unaffected; U.S. net exports decrease by $30,000; and
U.S. GDP decreases by $30,000.
Anything other than a change in the interest rate that decreases national saving shifts
the supply of loanable funds to the left.
a. True
b. False
Minimum-wage laws
a. reduce unemployment.
b. cause labor shortages, which further raise wages above equilibrium.
c. affect highly-educated workers more than high school dropouts.
d. None of the above is correct.
Public policy
a. can reduce both frictional unemployment and the natural rate of unemployment.
b. can reduce frictional unemployment, but it cannot reduce the natural rate of
unemployment.
c. cannot reduce frictional unemployment, but it can reduce the natural rate of
unemployment.
d. cannot reduce either frictional unemployment or the natural rate of unemployment.
In the basket of goods that is used to compute the consumer price index, which of the
following categories of consumer spending is the smallest?
a. food & beverages
b. recreation
c. housing
d. apparel
Figure 3-22
RefertoFigure3-22.Which of the following statements is correct regarding comparative
advantage?
a. Alice has a comparative advantage in the production of both lemonade and pizzas.
b. Betty has a comparative advantage in the production of both lemonade and pizzas.
c. Alice has a comparative advantage in the production of pizzas while Betty has a
comparative advantage in the production of lemonade.
d. Alice has a comparative advantage in the production of lemonade while Betty has a
comparative advantage in the production of pizzas.
Friedman argued that the Fed could use monetary policy to peg
a. nominal exchange rates.
b. the level of real GDP.
c. the rate of unemployment.
d. None of the above is correct.
Figure30-1
RefetoFigure30-1. If the money supply is MS2and the value of money is 2, then
a. the quantity of money demanded is greater than the quantity supplied; the price level
will rise.
b. the quantity of money demanded is greater than the quantity supplied; the price level
will fall.
c. the quantity of money supplied is greater than the quantity demanded; the price level
will rise.
d. the quantity of money supplied is greater than the quantity demanded; the price level
will fall.
You bake cookies. One day you double the time you spend, double the number of
chocolate chips, flour, eggs, and all your other inputs, and bake twice as many cookies.
Your cookie production function has
a. decreasing returns to scale.
b. zero returns to scale.
c. constant returns to scale.
d. increasing returns to scale.
Something that induces a person to act is called
a. a trade-off.
b. a policy.
c. an incentive.
d. an opportunity cost.
If the government reduced the minimum wage and pursued expansionary monetary
policy, then in the long run
a. both the unemployment rate and the inflation rate would be higher.
b. both the unemployment rate and the inflation rate would be lower.
c. the unemployment rate would be higher and the inflation rate would be lower.
d. the unemployment rate would be lower and the inflation rate would be higher.
Which of the following principles is not one of the four principles of individual
decisionmaking?
a. People face tradeoffs.
b. Trade can make everyone better off.
c. People respond to incentives.
d. Rational people think at the margin.
How does the Fed Open Market Committee increase the money supply?
By law what goals are the Federal Reserve to pursue? What, if any, specific weights are
given for these goals?
Suppose a wave of optimism causes firms to increase investment. To stabilize output
and employment, the Federal Reserve will .
The money multiplier iswhen the reserve ratio is 12.5 percent.
The reserve ratio for this bank is. If the required reserve ratio is 10 percent, then this
bank has excess reserves of _____.
Table 28-9
The table below lists the number of people by labor force classification for the country
of Shelbyville.
RefetoTable28-9. What is the labor force participation rate?
Like biologists and physicists, economists use the dispassionate development and
testing of how the world works known as the
Suppose the interest rate is 5% and that you are to receive three annual payments of
$10,000, with the first payment one year from now, the second payment two years from
now, and the third payment three years from now. What is the present value of this
stream of payments?
Budget Reform
Due to concerns about a rising level of debt relative to GDP, Congress and the President
cut expenditures and raise taxes.
RefertoBudgetReform. This policy change causes the exchange rate to change. What
does the change in the exchange rate to do to net exports?
Table 4-15
The following table shows the number of cases of water each seller is willing to sell at
the prices listed.
RefertoTable4-15.Assuming these are the only four suppliers in this market and the
function for market demand is QD=1000-100P, where QDis the quantity demanded and
P is the price, what is the equilibrium price?
If the price level were to rise from 160 to 200, in what direction and by how much
would the value of a dollar change?
A country recently had 500 billion euros of national saving and 200 billion euros of
domestic investment. What was its net capital outflow? What was its quantity of
loanable funds demanded?
How are Federal Reserve Board Governors selected?
Who would be more likely to study the effects of rent control on housing in New York
City, a macroeconomist or a microeconomist?