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The demand for seats in 10 a.m. classes at the university is higher than the demand for
seats in 8 a.m. classes. The supply of seats is fixed. If the university can only charge a
single price and wishes to maximize the total number of seats purchased during the day,
it should set the price
a. at equilibrium for 8 a.m. classes.
b. at equilibrium for 10 a.m. classes.
c. midway between the two equilibria.
d. below either 8 a.m. or 10 a.m. equilibrium price.
In a two-country world consisting of Japan and the United States, a contraction in the
Japanese economy will lead to lower Real GDP in the United States.
a. True
b. False
Exhibit 15-1
A Keynesian monetary policy to eliminate an inflationary gap can be portrayed as a
movement between point
a. A and point B.
b. B and point C.
c. C and point D.
d. D and point A.
According to the textbook, if the government had taxed everyone who earned more than
$1 million an income tax rate of 100 percent in 2012, the budget deficit for that year
would have been completely eliminated.
a. True
b. False
The Federal Open Market Committee (FOMC) meets on the first Tuesday of each
month.
a. True
b. False
Which of the following is not consistent with a self-regulating economy?
a. flexible prices
b. flexible wages
c. a labor market in which wages fall if there is a surplus
d. a labor market in which wages rise if there is a shortage
e. none of the above (all are consistent with a self-regulating economy)
When is it best to sell bonds?
a. When interest rates are expected to rise, because this means bond prices will rise.
b. When interest rates are expected to fall, because this means bond prices will rise.
c. When interest rates are expected to rise, because this means bond prices will fall.
d. When interest rates are expected to fall, because this means bond prices will fall.
In order for a price ceiling to have an impact on a market it must be set above the
equilibrium price.
a. True
b. False
If total production (TP) is less than total expenditures (TE), it follows that
a. optimum inventory levels fall.
b. firms have underproduced.
c. firms increase the quantity of goods they produce.
d. b and c
e. a, b, and c
Suppose that one year ago you purchased a $1,000 bond with an interest payment of
$40 per year and, at the time, the interest rate was 4 percent. One year later the interest
rate on bonds has increased to 5 percent, and you still hold the bond you purchased a
year ago. If you were to sell your bond now, the price that you could sell it for would be
a. higher than it was when you bought it.
b. lower than it was when you bought it.
c. the same as it was when you bought it, that is, $1,000.
d. lower or higher than it was when you bought it, but we cannot determine which.
Traditional monetarists advocate for a rule for _____________ , while market
monetarists argue that monetary policy should focus on a ______________________.
a. nominal GDP target; money supply growth
b. Real GDP target; nominal GDP target
c. money supply growth; Real GDP target
d. money supply growth; nominal GDP target
When interest rates fall in a given economy, it causes firms to borrow __________
funds used for purchasing capital goods.The result will be a(n) ___________ in the
level of capital employed in the economy.In terms of the production function (graphed
with labor on the horizontal axis and Real GDP on the vertical axis), this then
causes____________________ which makes the LRAS curve shift ____________
resulting in ______________________.
a. more; increase; the production function to shift upward; rightward; economic growth
b. less; decrease; the production function to shift downward; leftward; a shrinking
economy
c. more; increase; a movement up along a given production function; rightward;
economic growth
d. more; increase; a movement down along a given production function; leftward; a
shrinking economy
