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Which of the following is an example of crowding out?
a. A decrease in the rate of growth of the money supply which causes a decrease in Real
GDP.
b. A budget deficit causes an increase in interest rates, which causes a decrease in
investment spending.
c. An increase in tariffs which causes a decrease in imports.
d. A decrease in government housing subsidies which causes an increase in private
spending on housing.
Which of the following statements is false?
a. The issuer of a bond is a borrower.
b. The person who buys a bond is a lender.
c. Interest earned on corporate bonds is exempt from federal income taxes.
d. The coupon rate on a bondis the percentage of the face value that the bondholder
receives annually until the bond matures.
Which of the following theories is not falsifiable or refutable?
a. Everything that has happened to Jane throughout her life happened to her specifically
because she was born on June 23, 1993.
b. People with blue eyes tend to be more sensitive to light than people with brown eyes.
c. Women who are electrical engineers tend to have fewer children than women who are
retail cashiers.
d. People who watch more than six hours of television per day tend to weigh more than
people who watch fewer hours of television daily.
e. all of the above
The interest rate that the Fed pays on reserves acts as a ceiling on the federal funds rate.
a. True
b. False
In 1950, the country with the highest per-capita GDP was
a. Switzerland.
b. New Zealand.
c. the United States.
d. Venezuela.
e. the Netherlands.
The main difference between new classical and new Keynesian theory is with respect to
the assumption of
a. how expectations are formed.
b. how flexible wages and prices are.
c. the slope of the SRAS curve.
d. the slope of the AD curve.
Which of the following is not a major responsibility of the Fed?
a. supplying the economy with paper money
b. providing check-clearing services
c. supervising member banks
d. serving as fiscal agent for the Treasury
e. All of the above are major responsibilities of the Fed.
Situation 4-1
During the winter of 1973-74, a general system of wage and price controls (including a
price ceiling on gasoline) was in force in the United States. At the beginning of 1974,
some oil-producing countries imposed an oil embargo (a legal prohibition on
commerce) on the West. In the spring of 1974, price controls were abolished. Before the
oil embargo, the price ceiling on gasoline had no noticeable effect on the market. What
is the most likely explanation for this?
a. The equilibrium price of gasoline was probably below the price ceiling.
b. The demand curve for gasoline in the 1970s was vertical.
c. The supply curve for gasoline in the 1970s was vertical.
d. The equilibrium price of gasoline was probably above the price ceiling.
Two economists, Smith and Jones, are discussing the currently high unemployment rate.
Smith says that something ought to be done quickly because the economy may not be
able to restore itself to full employment. Jones says that it is better to take a "hands-off"
approach. Which of the following is most likely to be true?
a. Smith and Jones are most likely both Keynesian economists with a few minor
differences of opinion.
b. Smith and Jones are most likely both classical economists with a few minor
differences of opinion.
c. Jones is likely to be a Keynesian economist and Smith is likely to be a classical
economist.
d. Smith is likely to be a Keynesian economist and Jones is likely to be a classical
economist.
e. none of the above.
Exhibit 15-6
At Q1, this economy is in a(n) ___________________ gap. An economist who believes
that the economy is self-regulating would assert that the ________________ curve will
shift rightward to push the economy to point _____________.
a. inflationary; SRAS; A
b. recessionary; SRAS; A
c. inflationary; AD; B
d. recessionary; AD; B
The effect of a drought on the price of an agricultural product will be greater the more
__________ the demand for the agricultural product.
a. price inelastic
b. price elastic
c. income elastic
d. a and c
e. b and c
A general definition of the "transmission mechanism" is: the routes or channels that
ripple effects created in the
a. market for goods and the services travel to affect the money market.
b. money market travel to affect the market for goods and services.
c. labor market travel to affect the market for goods and services.
d. market for goods and services travel to affect the labor market.
e. none of the above
One example of an optimal currency area is the states within the United States.
a. True
b. False
Smith sends her children to a private school on the other side of town.Tuition per
student per year is $15,000.Jones sends her children to a public school on her side of
town.Tuition per student per year is $0.Most people seem to think that the private
school and public school are equivalent when it comes to educating students. According
to a theory discussed in the textbook,
a. Smith lives in a more expensive home than Jones.
b. Jones lives in a more expensive home than Smith.
c. Smith and Jones live in homes that are priced the same.
d. Smith lives in a larger home than Jones.
e. none of the above
Many people buy one newspaper per day, but rarely do they buy two of the same
newspapers on the same day.What is the economic justification for this behavior?
a. The marginal benefit of purchasing the second newspaper exceeds the marginal cost
of purchasing that paper.
b. The marginal cost of purchasing the second newspaper exceeds the marginal benefit
of purchasing that paper.
c. The marginal benefit of purchasing the second newspaper equals the marginal cost of
purchasing that paper.
d. none of the above is an appropriate economic justification for this behavior.
Which of the following statements represents a correct sequence of events?
a. Productivity rises in the agriculture sector, the supply curve of foodstuffs shifts to the
left, price rises, and total revenue rises assuming demand is inelastic.
b. Productivity rises in the agriculture sector, the supply curve of foodstuffs shifts to the
right, price rises, and total revenue rises assuming demand is inelastic.
c. Productivity rises in the agriculture sector, the supply curve of foodstuffs shifts to the
right, price falls, and total revenue falls assuming demand is elastic.
d. Productivity rises in the agriculture sector, the supply curve of foodstuffs shifts to the
left, price falls, and total revenue rises assuming demand is elastic.
e. none of the above
Scarcity affects everyone, even billionaires.
a. True
b. False
