Other things the same, as the price level rises,
a. the interest rate rises causing aggregate demand to shift.
b. the interest rate rises causing a movement along a given aggregate-demand curve.
c. the interest rate falls causing aggregate demand to shift.
d. the interest rate falls causing a movement along a given aggregate-demand curve.
Higher saving is associated with
a. a larger capital stock and higher productivity.
b. a larger capital stock but not higher productivity.
c. higher productivity but not a higher capital stock.
d. neither a higher capital stock nor higher productivity.
Barb’s aunt gave her $100 for her birthday with the condition that Barb buy herself
something. In deciding how to spend the money, Barb narrows her options down to four
choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally
she decides on Option B. The opportunity cost of this decision is
a. the value to Barb of the option she would have chosen had Option B not been
available.
b. the value to Barb of Options A, C and D combined.
c. the average of the values to Barb of Options A, C, and D. d. $100.
The rate at which the Fed lends money to banks is
a. the prime rate.
b. fixed at 4%.
c. the federal funds rate.
d. the discount rate.
Changes in the interest rate help explain
a. only the slope of, not shifts of aggregate demand.
b. only shifts of, not the slope of aggregate demand.
c. both the slope of and shifts of aggregate demand.
d. neither the slope nor shifts of aggregate demand.
Figure27-1. The figure shows a utility function.
RefertoFigure27-1. For the person to whom this utility function applies,
a. the more wealth she has, the less utility she gets from an additional dollar of wealth.
b. the more wealth she has, the more utility she gets from an additional dollar of wealth.
c. her level of satisfaction will be enhanced more by an increase in wealth from $600 to
$800 than it would be by an increase in wealth from $400 to $600.
d. her level of satisfaction will be enhanced equally by an increase in wealth from $600
to $800 or by an increase in wealth from $400 to $600.
The real interest rate is 4 percent and the nominal interest rate is 6 percent. Is there
inflation or deflation? What is the inflation or deflation rate?
a. deflation; 2 percent
b. deflation; 10 percent
c. inflation; 2 percent
d. inflation; 10 percent
As capital per worker rises, output per worker rises. However, this increase in output
per worker is smaller at smaller levels of existing capital per worker.
a. True
b. False
The CPI is calculated
a. monthly by the Department of Commerce.
b. monthly by the Bureau of Labor Statistics.
c. quarterly by the Department of Commerce.
d. quarterly by the Bureau of Labor Statistics.
In response to the sharp decline in stock prices in October 1987, the Federal Reserve
a. increased the money supply and increased interest rates.
b. increased the money supply and decreased interest rates.
c. decreased the money supply and increased interest rates.
d. decreased the money supply and decreased interest rates.
Table 28-3
2009 Labor Data for Baltivia
RefetoTable28-3.How many adults were notin Baltivia’s labor force in 2009?
a. 4,400
b. 6,620
c. 7,400
d. 8,690
Other things the same, technological progress raises the price level.
a. True
b. False
The country of Cedarland does not trade with any other country. Its GDP is $17 billion.
Its government purchases $5 billion worth of goods and services each year and collects
$6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland,
a. investment is $6 billion and consumption is $7 billion.
b. investment is $6 billion and consumption is $6 billion.
c. investment is $7 billion and consumption is $7 billion.
d. investment is $7 billion and consumption is $6 billion.
Figure27-2. The figure shows a utility function for Britney.
RefertoFigure27-2. Suppose Britney begins with $1,050 in wealth. Starting from there,
a. she would be willing to accept a coinflip bet that would result in her winning $300 if
the result was “heads” or losing $300 if the result was “tails.”
b. the pain of losing $300 of her wealth would equal the pleasure of adding $300 to her
wealth.
c. the pain of losing $300 of her wealth would exceed the pleasure of adding $300 to
her wealth.
d. the pleasure of adding $300 to her wealth would exceed the pain of losing $300 of
her wealth.
The increase in living standards of American workers over the past century is primarily
due to
a. the success of labor unions.
b. minimum-wage laws.
c. improvements in productivity.
d. None of the above are correct.
If there were no factors keeping wages from reaching equilibrium then there would be
no
a. cyclical unemployment.
b. frictional unemployment.
c. structural unemployment.
d. natural rate of unemployment.
The duties of the Council of Economic Advisers are to advise the president of the
United States and to determine U.S. monetary policy.
a. True
b. False
Suppose today’s CPI is 134.85, and suppose one must spend $580 today to purchase the
same basket of goods and services that could be bought for $400 in 1989. Then the CPI
in 1989 was
a. 24.27.
b. 60.68.
c. 93.00.
d. 195.53.
Al, Ralph, and Stan are all intending to retire. Each currently has $1 million in assets.
Al will earn 16% interest and retire in two years. Ralph will earn 8% interest and retire
in four years. Stan will earn 4% interest and retire in eight years. Who will have the
largest sum when he retires?
a. Al
b. Ralph
c. Stan
d. They all retire with the same amount.
The source of hyperinflations is primarily
a. lower output growth.
b. continuing declines in velocity.
c. increases in money-supply growth.
d. continuing increases in money demand.
Music compact discs are normal goods. What will happen to the equilibrium price and
quantity of music compact discs if musicians accept lower royalties, compact disc
players become cheaper, more firms start producing music compact discs, and music
lovers experience an increase in income?
a. Price will fall, and the effect on quantity is ambiguous.
b. Price will rise, and the effect on quantity is ambiguous.
c. Quantity will fall, and the effect on price is ambiguous.
d. Quantity will rise, and the effect on price is ambiguous.
Water pollution from pulp and paper mills harms plants, animals, and humans. This is
an example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. There is no market failure in this case.
Total output in an economy increases when each person specializes because
a. there is less competition for the same resources.
b. each person spends more time producing that product in which he or she has a
comparative advantage.
c. a wider variety of products will be produced within each country due to
specialization.
d. government necessarily plays a larger role in the economy due to specialization.
Which of the following is most likely to increase exports?
a. a reduction in domestic political instability
b. ending investment tax credits
c. a reduction in the size of the government’s budget surplus
d. None of the above will increase exports.
The ability to profit by purchasing wheat in the U.S. and selling it in China implies that
the
a. nominal exchange rate is less than 1.
b. nominal exchange rate is greater than 1.
c. real exchange rate is less than 1.
d. real exchange rate is greater than 1.
When the money market is drawn with the value of money on the vertical axis, if
money demand shifts leftward, then initially there is an
a. excess demand for money which causes the price level to rise.
b. excess demand for money which causes the price level to fall.
c. excess supply of money which causes the price level to rise.
d. excess supply of money which causes the price level to fall.
During recessions employment typically
a. falls substantially. As the recession ends, employment rises rapidly.
b. rises substantially. As the recession ends, employment declines gradually.
c. falls substantially. As the recession ends, employment rises gradually.
d. rises substantially. As the recession ends, employment declines rapidly.
The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real
GDP is $200 billion. What are the price level and velocity in Muckland?
a. The price level and velocity are both 8.
b. The price level is 2 and velocity is 8.
c. The price level and velocity are both 4.
d. The price level is 4 and velocity is 8.
Figure 3-17
Refer to Figure3-17. Suppose Daisy decides to increase her production of pies by 6.
What is the opportunity cost of this decision?
a. 8/3 tarts
b. 4.5 tarts
c. 8 tarts
d. 10 tarts
Tom Brady should pay someone else to mow his lawn instead of mowing it himself,
unless
a. Brady has an absolute advantage over everyone else in mowing his lawn.
b. Brady has a comparative advantage over everyone else in mowing his lawn.
c. Brady’s opportunity cost of mowing his lawn is higher than it is for everyone else.
d. All of the above are correct.