Fundamental analysis shows that Quadrangle Company is fairly valued. Then
Quadrangle Company unexpectedly improves its production techniques and
unexpectedly hires a new CEO away from another very successful competitor. Suppose
this has no effect on the price of the stock of Quadrangle Company.
a. Fundamental analysis would now show the corporation is overvalued. The fact that
the price was unchanged is consistent with the efficient markets hypothesis.
b. Fundamental analysis would now show the corporation is overvalued. The fact that
the price was unchanged is not consistent with the efficient markets hypothesis.
c. Fundamental analysis would now show the corporation is undervalued. The fact that
the price was unchanged is consistent with the efficient markets hypothesis.
d. Fundamental analysis would now show the corporation is undervalued. The fact that
the price was unchanged is not consistent with the efficient markets hypothesis.
The natural rate of unemployment
a. is constant over time.
b. varies over time, but can”t be changed by the government.
c. is the socially desirable rate of unemployment.
d. does not depend on the rate at which the Fed increases the money supply.
The slope of a line is equal to
a. the change in the value of x divided by the change in the value of y.
b. the change in the value of y divided by the change in the value of x.
c. the horizontal distance divided by the vertical distance.
d. the value of y divided by the value of x.
Which of the following events would cause both the equilibrium price and equilibrium
quantity of number two grade potatoes to increase if number two grade potatoes are an
inferior good?
a. an increase in consumer income
b. a decrease in consumer income
c. greater government restrictions on agricultural chemicals
d. fewer government restrictions on agricultural chemicals
When studying changes in the economy over time, economists want a measure of the
total quantity of goods and services the economy is producing that is not affected by
changes in the prices of those goods and services. In other words, economists want to
study
a. nominal GDP.
b. real GDP.
c. the GDP deflator.
d. GNP.
Monetary Policy in Flosserland
In Flosserland, the Department of Finance is responsible for monetary policy.
Flosserland has had an inflation rate of 25% for many years.
RefertoMonetaryPolicyinFlosserland.Suppose that the Flosserland Department of
Finance has run a public relations campaign claiming it will reduce inflation to 12.5%
and that it actually reduces inflation to that level. Suppose that the public was very
skeptical and in fact thought the Flosserland Department of Finance was going to raise
inflation to 30% so it could increase its expenditures. Then
a. unemployment falls, but it would have fallen less if people had been expecting 25%
inflation.
b. unemployment falls, but it would have fallen less if people had been expecting 35%
inflation.
c. unemployment rises, but it would have risen less if people had been expecting 25%
inflation.
d. unemployment rises, but it would have risen less if people had been expecting 35%
inflation.
If the nominal interest rate is 7 percent and the real interest rate is 2 percent, then what
is the inflation rate?
a. 9.0 percent
b. 5 percent
c. 3.5 percent
d. None of the above is correct.
Suppose workers notice a fall in their nominal wage but are slow to notice that the price
of things they consume have fallen by the same percentage. They may infer that the
reward to working is
a. temporarily low and so supply a smaller quantity of labor.
b. temporarily low and so supply a larger quantity of labor.
c. temporarily high and so supply a smaller quantity of labor.
d. temporarily high and so supply a larger quantity of labor.
A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its
inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S.
construction company. In which quarter(s) is (are) GDP higher?
a. the first and the second
b. the first but not the second
c. the second but not the first
d. neither the first nor the second
The goal of monetary policy and fiscal policy is to
a. offset the shifts in aggregate demand and thereby eliminate unemployment.
b. offset shifts in aggregate demand and thereby stabilize the economy.
c. enhance the shifts in aggregate demand and thereby create fluctuations in output and
employment.
d. enhance the shifts in aggregate demand and thereby increase economic growth
The term marketfailurerefers to
a. a situation in which the market on its own fails to allocate resources efficiently.
b. an unsuccessful advertising campaign which reduces demand for a product.
c. a situation in which competition among firms becomes ruthless.
d. a firm which is forced out of business because of losses.
Northwest Wholesale Foods sells common stock. The company is using
a. equity financing and the return shareholders earn is fixed.
b. equity financing and the return shareholders earn depends on how profitable the
company is.
c. debt financing and the return shareholders earn is fixed.
d. debt financing and the return shareholders earn depends on how profitable the
company is.
Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer’s basket
consists of 15 bushels of peaches and 10 bushels of pecans.
RefertoTable24-2. If 2013 is the base year, then the CPI for 2013 was
a. 95.7.
b. 100.0.
c. 90.0.
d. 213.6.
Country A and country B are the same except country A currently has more capital.
Assuming diminishing returns, if both countries increase their capital by 100 units and
other factors that determine output are unchanged, then
a. output in country A increases by more than in country B.
b. output in country A increases by the same amount as in country B.
c. output in country A increases by less than in country B.
d. None of the above is necessarily correct.
In 1914, Henry Ford began paying his workers $5 per day, about twice the going wage.
As a result, turnover and absenteeism fell and productivity and profits rose.
a. True
b. False
If the government currently has a budget deficit, then
a. it does not necessarily have a debt.
b. its debt is increasing.
c. government expenditures are greater than taxes.
d. All of the above are correct.
During the last few decades in the United States, health officials have argued that eating
too much beef might be harmful to human health. As a result, there has been a
significant decrease in the amount of beef produced. Which of the following best
explains the decrease in production?
a. Beef producers, concerned about the health of their customers, decided to produce
relatively less beef.
b. Government officials, concerned about consumer health, ordered beef producers to
produce relatively less beef.
c. Individual consumers, concerned about their own health, decreased their demand for
beef, which lowered the equilibrium price of beef, making it less attractive to produce.
d. Anti-beef protesters have made it difficult for both buyers and sellers of beef to meet
in the marketplace.
By definition, exports are
a. limits placed on the quantity of goods brought into a country.
b. goods in which a country has an absolute advantage.
c. people who work in foreign countries.
d. goods produced domestically and sold abroad.
Which of the following is nota cause of frictional unemployment?
a. the destruction of manufacturing jobs
b. a worker leaving a job to find one with better benefits
c. minimum-wage laws
d. unemployment insurance
U.S. Financial Crisis
Suppose that foreigners had reduced confidence in U.S. financial institutions and
believed that privately issued U.S. bonds were more likely to be defaulted on.
RefertoU.S.FinancialCrisis.U.S. net exports would
a. rise which by itself would increase aggregate demand.
b. rise which by itself would decrease aggregate demand.
c. fall which by itself would increase aggregate demand.
d. fall which by itself would decrease aggregate demand.
The economy’s two most important financial markets are
a. the investment market and the saving market.
b. the bond market and the stock market.
c. banks and the stock market.
d. financial markets and financial institutions.
A perpetuityis
a. a financial intermediary that has existed throughout recorded history.
b. an instrument of equity finance.
c. a stock that pays dividends forever.
d. a bond that pays interest forever.
Which advantage(s) do mutual funds claim to provide?
a. diversification and access to the skills of professional money managers
b. diversification but not access to the skills of professional money managers
c. access to the skills of professional money managers but not diversification
d. neither diversification nor access to the skills of professional money managers.
If in some year nominal GDP was $18 billion and the GDP deflator was 120, what was
real GDP?
a. $6.7 billion.
b. $15 billion.
c. $21.6 billion.
d. $38 billion.
The adage, “There is no such thing as a free lunch,” is used to illustrate the principle
that
a. goods are scarce.
b. people face tradeoffs.
c. income must be earned.
d. households face many decisions.
The sticky-wage theory of the short-run aggregate supply curve says that the quantity of
output firms supply will increase if
a. the price level is higher than expected making production more profitable.
b. the price level is higher than expected making production less profitable.
c. the price level is lower than expected making production more profitable.
d. the price level is higher than expected making production less profitable.
If a country changes its corporate tax laws so that domestic businesses build and
manage more business in other countries, then the net capital outflow of that country
a. and the net capital outflow of other countries rise.
b. rises and the net capital outflow of other countries fall.
c. falls and the net capital outflow of other countries rise.
d. None of the above are correct.
If the real exchange rate is less than 1, then the
a. nominal exchange rate x U.S. price > foreign price. The dollars required to purchase
a good in the U.S. would buy more than enough foreign currency to buy the same good
overseas.
b. nominal exchange rate x U.S. price > foreign price. The dollars required to purchase
a good in the U.S. would not buy enough foregoing currency to buy the same good
overseas.
c. nominal exchange rate x U.S. price < foreign price. The dollars required to purchase
a good in the U.S. would buy more than enough foreign currency to buy the same good
overseas.
d. nominal exchange rate x U.S. price < foreign price. The dollars required to purchase
a good in the U.S. would not buy enough foreign currency to buy the same good
overseas.
Table24-12.Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
RefertoTable24-12.Suppose Will’s 2009 food expenditures in 2011 dollars amount to
$5,670. Then
a. the consumer price index was 11.8 percent higher in 2011 than it was in 2009.
b. the inflation rate in 2011 was 8 percent.
c. Will’s 2011 food expenditures in 2009 dollars amount to $5,740.
d. Will’s 2010 food expenditures in 2011 dollars amount to $6,210.
An increase in the number of corporations in a portfolio from 1 to 10 reduces
a. market risk by more than an increase from 110 to 120.
b. market risk by less than an increase from 110 to 120.
c. firm-specific risk by more than an increase from 110 to 120.
d. firm-specific risk by less than an increase from 110 to 120.
Which of the following are residents of rich countries likely to have in greater
quantities, or better quality, than residents of poor countries?
a. housing
b. healthcare
c. life expectancy
d. All of the above.
If a country raises its budget deficit, then its
a. net capital outflow and net exports rise.
b. net capital outflow rises and net exports fall.
c. net capital outflow falls and net exports rise.
d. net capital outflow and net exports fall.
Which of the following measures how the level of well-being in a country has changed
over time?
a. level of nominal GDP per person.
b. growth rate of nominal GDP.
c. growth rate of real GDP.
d. growth rate of real GDP per person.
A Mexican oil field service company works on oil rigs in the U.S. The value of the
company’s services produced by Mexican citizens and the equipment they own is
included in
a. Mexican GNP and U.S. GNP.
b. Mexican GDP and U.S. GNP.
c. Mexican GNP and U.S. GDP.
d. Mexican GDP and U.S. GDP.