If the quantity of loanable funds demanded exceeds the quantity of loanable funds
supplied,
a. there is a surplus so interest rates will rise.
b. there is a surplus so interest rates will fall.
c. there is a shortage so interest rates will rise.
d. there is a shortage so interest rates will fall.
When prisoners use cigarettes or some other good as money, cigarettes become
a. commodity money, but do not function as a unit of account.
b. commodity money and function as a unit of account.
c. fiat money, but do not function as a unit of account.
d. fiat money and function as a unit of account.
An increase in the government budget deficit shifts the supply of loanable funds to the
left.
a. True
b. False
A decrease in the price of domestically produced industrial robots will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
If the public correctly perceives that the central bank will reduce inflation, then
a. the short-run Phillips curve shifts right, and unemployment will rise by more than
otherwise.
b. the short-run Phillips curve shifts right, and unemployment will rise by less than
otherwise.
c. the short-run Phillips curve shifts left, and unemployment will rise by more than
otherwise.
d. the short-run Phillips curve shifts left, and unemployment will rise by less than
otherwise.
Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of
improved international relations and increased confidence in policy makers, people
become more optimistic about the future and stay this way for some time.
RefertoOptimism.How is the new long-run equilibrium different from the original
one?
a. both price and real GDP are higher
b. both price and real GDP are lower.
c. the price level is the same and GDP is higher.
d. the price level is higher and real GDP is the same.
The shoeleather cost of inflation refers to
a. the redistributional effects of unexpected inflation.
b. the time spent searching for low prices when inflation rises.
c. the waste of resources used to maintain lower money holdings.
d. the increased cost to the government of printing more money.
Two alternative measures of the overall level of prices are
a. the inflation rate and the consumer price index.
b. the inflation rate and the GDP deflator.
c. the GDP deflator and the consumer price index.
d. the cost of living index and nominal GDP.
Suppose that neither food-service workers nor retail salespeople are unionized. If
food-service workers unionize, then the supply of retail salespeople will
a. rise, as will the wages of retail salespeople.
b. rise, and the wages of retail salespeople will fall.
c. fall, as will the wages of retail salespeople.
d. fall, and the wages of retail salespeople will rise.
If inflation expectations decline, then the short-run Phillips curve shifts
a. left, so that at any inflation rate unemployment is lower in the short run than before.
b. right, so that at any inflation rate unemployment is lower in the short run than before.
c. right, so that at any inflation rate unemployment is higher in the short run than
before.
d. left, so that at any inflation rate unemployment is higher in the short run than before.
Higher saving is associated with
a. a larger capital stock and a higher standard of living.
b. a larger capital stock but not a higher standard of living.
c. a higher standard of living but not a larger capital stock.
d. neither a higher standard of living nor a higher capital stock.
Today, producers changed their expectations about the future. This change
a. can cause a movement along a supply curve.
b. can affect future supply, but not today’s supply.
c. can affect today’s supply.
d. cannot affect either today’s supply or future supply.
In most countries today, many goods and services consumed are imported from abroad,
and many goods and services produced are exported to foreign customers.
a. True
b. False
The short-run relationship between inflation and unemployment is often called
a. the Classical Dichotomy.
b. Money Neutrality.
c. the Phillips curve.
d. None of the above is correct.
If the demand for a product decreases, then we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both increase.
d. and equilibrium quantity to both decrease.
Fundamental analysis shows that stock in “Night and Day” fitness centers has a price
below its present value.
a. This stock is undervalued; you should consider adding it to your portfolio.
b. This stock is undervalued; you shouldn’t consider adding it to your portfolio.
c. This stock is overvalued; you should consider adding it to your portfolio.
d. This stock is overvalued; you shouldn’t consider adding it to your portfolio.
The production possibilities frontier illustrates
a. the trade-off between efficiency and equality.
b. the combination of output that an economy should produce.
c. the combination of output that each member of society should consume.
d. None of the above is correct.
A country is likely to have a higher sacrifice ratio if
a. contracts are shorter, and people believe the central bank will reduce inflation.
b. contracts are longer, and people believe the central bank will not reduce inflation
c. contracts are longer, and people believe the central bank will reduce inflation.
d. contracts are shorter, and people believe the central bank will not reduce inflation.
In order to understand how the economy works in the short run, we need to
a. study the classical model.
b. study a model in which real and nominal variables interact.
c. understand that “money is a veil.”
d. understand that money is neutral in the short run.
RefertoFigure35-7. Starting from C and 3, in the long run, an increase in money
supply growth moves the economy to
a. A and 1.
b. back to C and 3.
c. D and 4.
d. F and 5.
Changes in real GDP reflect
a. only changes in prices.
b. only changes in the amounts being produced.
c. both changes in prices and changes in the amounts being produced.
d. neither changes in prices nor changes in the amounts being produced.
A demand curve shows the relationship
a. between income and quantity demanded.
b. between price and income.
c. between price and quantity demanded.
d. among income, price, and quantity demanded.
According to the circular-flow diagram GDP
a. can be computed as either the revenue firms receive from the sales of goods and
services or the payments they make to factors of production.
b. can be computed as the revenue firms receive from the sales of goods and services
but not as the payments they make to factors of production.
c. can be computed as payments firms make to factors of production but not as revenues
they receive from the sales of goods and services.
d. cannot be computed as either the revenue firms receive or the payments they make to
factors of production.
The Federal Open Market Committee
a. operates with almost complete discretion over monetary policy.
b. is required to increase the money supply by a given growth rate each year.
c. is required to keep short-term interest rates within a range set by Congress.
d. is required by its charter to change the money supply using a complex formula that
concerns the tradeoff between inflation and unemployment.
Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the right-hand diagram, “Inf Rate” means
“Inflation Rate.”
RefertoFigure35-9. Which of the following events could explain the shift of the
aggregate-supply curve from AS1to AS2?
a. a reduction in firms’ costs of production
b. a reduction in taxes on consumers
c. an increase in the price level
d. an increase in the world price of oil
For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly
its inflation rate drops to 3%. The drop in the inflation rate
a. could be due to slower money supply growth. We would expect unemployment to be
higher.
b. could be due to slower money supply growth. We would expect unemployment to be
lower.
c. could be due to higher money supply growth. We would expect unemployment to be
higher.
d. could be due to higher money supply growth. We would expect unemployment to be
lower.
Other things equal, the higher the price level, the higher is the real wealth of
households.
a. True
b. False
In 1980, the combination of inflation and unemployment the U.S. was experiencing
a. resulted from a leftward shift of the short-run Phillips curve.
b. was consistent with feasible inflation-unemployment combinations provided by the
Phillips curve of the 1960s.
c. followed two supply shocks that were triggered by the Organization of Petroleum
Exporting Countries.
d. All of the above are correct.
Figure 2-17
RefertoFigure2-17. The movement from point B to point C is a(n)
a. shift of the demand curve.
b. movement along the demand curve.
c. indication that the price of grapes has changed.
d. indication that the costs incurred by firms that produce grapes have changed.
Figure 2-23
RefertoFigure2-23. It is possible for this economy to produce 30 doghouses and 20
dishwashers.
a. True
b. False
Figure 33-6.
RefertoFigure33-6. Which of the long-run aggregate-supply curves is consistent with a
recession?
a. LRAS1
b. LRAS2
c. LRAS3
d. Both LRAS1and LRAS3
John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their
savings account to purchase $2,500 worth of traveler’s checks. As a result of these
changes,
a. M1 increases by $2,500 and M2 decrease by $2,500.
b. M1 increases by $2,500 and M2 stays the same.
c. M1 and M2 stay the same.
d. M1 decreases by $2,500 and M2 increases by $2,500.