Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to
72 Algerian dinar per dollar, the dollar has
a. appreciated and so buys more Algerian goods.
b. appreciated and so buys fewer Algerian goods.
c. depreciated and so buys more Algerian goods.
d. depreciated and so buys fewer Algerian goods.
If a bushel of wheat costs $6.40 in the United States, costs 40 pesos in Mexico, and the
nominal exchange rate is 10 pesos per dollar, then the real exchange rate is
a. 1.60
b. 1.25
c. .625
d. None of the above is correct.
For an economy as a whole, income must exceed expenditure.
a. True
b. False
Figure 34-7
RefertoFigure34-7. Which of the following is correct?
a. A wave of optimism could move the economy from point a to point b.
b. If aggregate demand moves from AD1to AD2, the economy will stay at point b in
both the short run and long run.
c. It is possible that either fiscal or monetary policy might have caused the shift from
AD1to AD2.
d. All of the above are correct.
Which of the following transactions adds to U.S. GDP for 2015?
a. In 2015, Ann sells a car that she bought in 2011 to Bill for $7,000.
b. An American management consultant works in Canada during the summer of 2015
and earns the equivalent of $40,000 during that time.
c. When Ken and Kim were both single, they lived in separate apartments and each paid
$800 in rent. Ken and Kim got married in 2015 and they bought a previously
unoccupied house that, according to reliable estimates, could be rented for $1,700 per
month.
d. None of the above transactions adds to U.S. GDP for 2015.
If a firm sells a total of 100 shares of stock, then
a. each share represents 1 percent of the firm’s indebtedness.
b. each share represents ownership of 1 percent of the firm.
c. the firm is engaging in term finance.
d. All of the above are correct.
Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the
United States. By itself, this sale
a. increases U.S. net exports and decreases Russian net exports.
b. increases U.S. net exports and has no effect on Russian net exports.
c. decreases U.S. net exports and increases Russian net exports.
d. decreases U.S. net exports and has no effect on Russian net exports.
The long-run effect of an increase in household consumption is to raise
a. both real output and the price level.
b. real output and lower the price level.
c. real output and leave the price level unchanged.
d. the price level and leave real output unchanged.
The Council of Economic Advisers’ EconomicReportofthePresidentdiscusses recent
developments in the economy and presents the council’s analysis of current policy
issues.
a. True
b. False
From 2008 to 2012 both U.S. saving and U.S. investment fell.
a. True
b. False
Figure 2-3
RefertoFigure2-3.Which shape refers to the markets for goods and services?
a. oval A
b. oval B
c. rectangle 1
d. rectangle 2
In the United States, incomes historically have grown about 2 percent per year. At this
rate, average income doubles every
a. 15 years.
b. 25 years.
c. 35 years.
d. 45 years.
Suppose that the United States imposes an import quota on televisions. In the
open-economy macroeconomic model this quota shifts the
a. U.S. supply of loanable funds left.
b. U.S. demand for loanable funds left.
c. demand for U.S. dollars in the market for foreign-currency exchange right.
d. supply of U.S. dollars in the market for foreign-currency exchange left.
The country of Lessidinia has a tax system identical to that of the United States.
Suppose someone in Lessidinia bought a parcel of land for 20,000 foci (the local
currency) in 1960 when the price index equaled 100. In 2002, the person sold the land
for 100,000 foci, and the price index equaled 600. The tax rate on nominal gains was 20
percent. Compute the taxes on the nominal gain and the change in the real value of the
land in terms of 2002 prices to find the after-tax real rate of capital gain.
a. -60 percent
b. -30 percent
c. 30 percent
d. 60 percent
In the open economy model, the supply of loanable funds comes from national saving
and net capital outflow.
a. True
b. False
In the economy of Talikastan in 2015, consumption was $5000, exports were $400,
government purchases were $1000, imports were $600, and investment was $1200.
What was Talikastan’s GDP in 2015?
a. $6200
b. $6400
c. $7000
d. $8200
If real output grows at 3 percent per year and the inflation rate is 3 percent per year then
government debt can grow by 6 percent per year and not increase the ratio of debt to
income.
a. True
b. False
Suppose the nominal interest rate is 10 percent, the tax rate on interest income is 28
percent, and the inflation rate is 6 percent. Then the after-tax real interest rate is -3.2
percent.
a. True
b. False
The Federal Reserve operates under a rule that requires money supply growth to
increase by one percentage point for every percentage point that unemployment rises
above its natural rate.
a. True
b. False
Other things the same, which of the following responses would we expect to result from
a decrease in U.S. interest rates?
a. U.S. citizens decide to hold more foreign bonds.
b. People choose to hold more currency.
c. You decide to purchase a new oven for your cookie factory.
d. All of the above are correct.
Banks cannot influence the money supply if they are required to hold all deposits in
reserve.
a. True
b. False
When taxes increase, consumption
a. decreases as shown by a movement to the left along a given aggregate-demand curve.
b. decreases as shown by a shift of the aggregate demand curve to the left.
c. increases as shown by a movement to the right along a given aggregate-demand
curve.
d. increases as shown by a shift of the aggregate demand curve to the right.
Table 3-5
Assume that Aruba and Iceland can switch between producing coolers and producing
radios at a constant rate.
Refer to Table3-5. Assume that Aruba and Iceland each has 80 labor hours available. If
each country divides its time equally between the production of coolers and radios, then
total production is
a. 28 coolers and 50 radios.
b. 30 coolers and 9 radios.
c. 60 coolers and 18 radios.
d. 120 coolers and 36 radios.
Which of the following examples of production of goods and services would be
included in U.S. GDP?
a. Sally, a Canadian citizen, works on a drilling crew in North Dakota for Northland
Gas Services, and Northland sells the natural gas to a utility company in Canada.
b. Jim grows pecans for his family in the yard of their San Antonio home.
c. Joe grows marijuana in his Kansas City home and sells it to his friends and
neighbors.
d. None of the above examples of production would be included in U.S. GDP.
According to liquidity preference theory, a decrease in money demand for some reason
other than a change in the price level causes
a. the interest rate to fall, so aggregate demand shifts right.
b. the interest rate to fall, so aggregate demand shifts left.
c. the interest rate to rise, so aggregate demand shifts right.
d. the interest rate to rise, so aggregate demand shifts left.
If consumers often purchase muffins to eat while they drink their latts at local coffee
shops, what would happen to the equilibrium price and quantity of latts if the price of
muffins rises?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
Bank capital is
a. the machinery, structures, and equipment of the bank.
b. the resources that owners have put into the bank.
c. the reserves of the bank.
d. the bank’s total assets.
Figure 2-8
Refer to Figure2-8. Which point on the graph best represents the fact that, because
resources are scarce, not every conceivable outcome is feasible?
a. point J
b. point K
c. point L
d. point M
Figure 33-4
RefertoFigure33-4. If the economy starts at A and moves to D in the short run, the
economy
a. moves to A in the long run.
b. moves to B in the long run.
c. moves to C in the long run.
d. stays at D in the long run.
Aggregate demand includes
a. the quantity of goods and services the government, households, firms, and customers
abroad want to buy.
b. neither the quantity of goods and services the government, households, nor firms
want to buy nor the quantity of goods and services customers abroad want to buy.
c. the quantity of goods and service the government wants to buy, but not the quantity
of goods and services households, firms, or customers abroad want to buy.
d. the quantity of goods and services households and firms want to buy, but not the
quantity of goods and services the government wants to buy.
Which of the following equations is always correct in an open economy?
a. NX=Y-C-G-I
b. NX=S-I
c. NX=NCO
d. All of the above are correct.
Which of the following has a present value of $100?
a. $109.12 in two years when the interest rate is 4 percent
b. $113.98 in two years when the interest rate is 6 percent
c. $116.64 in two years when the interest rate is 8 percent
d. $123.17 in two years when the interest rate is 10 percent
For an economist, the idea of making assumptions is regarded generally as a
a. bad idea, since doing so leads to the omission of important ideas and variables from
economic models.
b. bad idea, since doing so invariably leads to data-collection problems.
c. good idea, since doing so helps to simplify the complex world and make it easier to
understand.
d. good idea, since economic analysis without assumptions leads to complicated results
that the general public finds hard to understand.