In recent decades Americans have increased their purchase of stocks of foreign-based
companies. The Americans who have bought these stocks were engaged in
a. foreign portfolio investment.
b. indirect domestic investment.
c. foreign direct investment.
d. foreign indirect investment.
Suppose that in some country the price of silver increased from $30 per ounce to $31
per ounce during a time when the overall price level increased by 5 percent. During this
period, the real price of silver
a. increased.
b. decreased.
c. stayed the same.
d. might have increased, decreased or stayed the same; more information is needed to
be sure.
Which of the following is the correct formula for calculating the inflation rate?
a.
b.
c.
d.
During a financial crisis the possibility of bank failures rose. An increase in the
likelihood of a bank failing shifts demand for its stock
a. right, so the price rises.
b. right, so the price falls.
c. left, so the price rises.
d. left, so the price falls.
Where can an economy not produce?
a. inside its production possibilities frontier
b. on its production possibilities frontier
c. outside its production possibilities frontier
d. at the endpoints of its production possibilities frontier
When the dollar depreciates, U.S.
a. net exports rise, which increases the aggregate quantity of goods and services
demanded.
b. net exports rise, which decreases the aggregate quantity of goods and services
demanded.
c. net exports fall, which increases the aggregate quantity of goods and services
demanded.
d. net exports fall, which decreases the aggregate quantity of goods and services
demanded.
If the efficientmarkethypothesicis correct, then
a. the number of shares of stock offered for sale exceeds the number of shares of stock
that people want to buy.
b. the stock market is informationally efficient.
c. stock prices never follow a random walk.
d. All of the above are correct.
More than three-fourths of the unemployed are recent entrants into the labor force.
a. True
b. False
U.S. Department of Labor data show that minimum-wage workers tend to be young,
less educated, more likely to be working part time, and concentrated in the leisure and
hospitality industry.
a. True
b. False
In the fourteenth century it is estimated that deaths resulting from the bubonic plague
reduced the population by about a third. Assuming diminishing returns, the decrease in
population should have
a. increased productivity and real GDP per person.
b. increased productivity but decreased real GDP per person.
c. increased real GDP per person, but decreased productivity.
d. decreased productivity and real GDP per person.
Which, if any, of the present values below are computed correctly?
a. A payment of $100 to be received one year from today, with a 2 percent interest rate,
has a present value of $98.81.
b. A payment of $200 to be received two years from today, with a 3 percent interest
rate, has a present value of $188.52.
c. A payment of $300 to be received three years from today, with a 4 percent interest
rate, has a present value of $234.34.
d. None of the above are correct to the nearest cent.
During a presidential campaign, the incumbent argues that he should be reelected
because nominal GDP grew by 12 percent during his 4-year term in office. You know
that population grew by 4 percent over the period and that the GDP deflator increased
by 6 percent during the past 4 years. You should conclude that real GDP per person
a. grew by more than 12 percent.
b. grew, but by less than 12 percent.
c. was unchanged.
d. decreased.
During a recession the economy experiences
a. rising employment and income.
b. rising employment and falling income.
c. rising income and falling employment.
d. falling employment and income.
Which of the following is notan argument in favoof reforming the tax laws to encourage
saving?
a. Saving is a key determinant of long-run prosperity.
b. Current tax laws discourage saving for the purpose of leaving a large bequest.
c. The substitution effect of a higher return to saving may be about equal to the income
effect of a higher return to saving.
d. The tax code currently taxes some forms of capital income twice.
If the Fed reduces inflation 1 percentage point and this makes output fall 2 percentage
points and unemployment rise 3 percentage points for six months, the sacrifice ratio is
a. 1.
b. 2.
c. 3.
d. 4.
If one producer is able to produce a good at a lower opportunity cost than some other
producer, then the producer with the lower opportunity cost is said to have an absolute
advantage in the production of that good.
a. True
b. False
Much of macroeconomics attempts to explain
a. changes in the price of oil and gasoline.
b. long-run growth and short-run fluctuations in real GDP.
c. changes in the growth rate of state government spending.
d. changes in the prices and quantities of individual goods and services.
The inflation rate is measured as the percentage change in a price index.
a. True
b. False
Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank
has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How
much does this bank now have to lend out if it decides to hold only required reserves?
a. $27,000
b. $27,190
c. $26,190
d. $9,000
Cocoa and marshmallows are complements, so a decrease in the price of cocoa will
cause an increase in the demand for marshmallows.
a. True
b. False
An increase in capital will increase real GNP per person
a. more in a poor country than a rich country. The increase in real GNP per person will
be larger if the addition to capital is from domestic rather than foreign investment.
b. more in a poor country than a rich country. The increase in real GNP per person will
be larger if the addition to capital is foreign rather than from domestic investment.
c. less in a poor country than a rich country. The increase in real GNP per person will be
larger if the addition to capital is from domestic rather than foreign investment.
d. less in a poor country than a rich country. The increase in real GNP per person will be
larger if the addition to capital is foreign rather than from domestic investment.
Data from the Bureau of Labor Statistics show that consumer spending on
transportation is only slightly higher than consumer spending on food and beverages.
a. True
b. False
If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the
a. supply of dollars in the market for foreign-currency exchange shifts right.
b. supply of dollars in the market for foreign-currency exchange shifts left.
c. demand for dollars in the market for foreign-currency exchange shifts right.
d. demand for dollars in the market for foreign-currency exchange shifts left.
If the price level increased from 200 to 250, then what was the inflation rate?
a. 50 percent
b. 25 percent
c. 20 percent
d. None of the above is correct.
If purchasing-power parity holds, then the value of the
a. nominal exchange rate is equal to one. A dollar buys as many goods in the U.S. as it
does overseas.
b. nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency
equal to the U.S. price level divided by the foreign country’s price level.
c. real exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does
overseas.
d. real exchange rate is equal to one. A dollar buys the quantity of foreign currency
equal to the U.S. price level divided by the foreign country’s price level.
In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds.
If the exchange rate is .9 pounds per euro, what is the real exchange rate?
a. 4/2.7 loaves of British bread per loaf of French bread
b. 3.6/3 loaves of British bread per loaf of French bread
c. 3/3.6 loaves of British bread per loaf of French bread
d. 2.7/4 loaves of British bread per loaf of French bread
Figure 34-3
RefertoFigure34-3. What quantity is represented by the downward-sloping line on the
left-hand graph?
a. the supply of money
b. the demand for money
c. the rate of inflation
d. Aggregate Demand.
When output rises, unemployment falls.
a. True
b. False
If the reserve ratio is 5 percent, then $600 of additional reserves can create up to
a. $30 of new money.
b. $3,000 of new money.
c. $12,000 of new money.
d. None of the above is correct.
Aggregate demand shifts right if at a given price level
a. taxes rise and shifts left if the money supply increases.
b. taxes rise and shifts right if the money supply increases.
c. taxes fall and shifts left if the money supply increases.
d. taxes fall and shifts right if the money supply increases.
Table 3-32
USandFrenchProductionOpportunities
RefertoTable3-32The US has a comparative advantage in the production of
a. wine.
b. cheese.
c. both wine and cheese.
d. neither wine nor cheese.
If the producers of canned green beans expect the price of canned green beans to
increase in the future due to an increase in demand, they may put some of their current
production into storage and supply less in the market today.
a. True
b. False
Figure 35-5
Refertofigure35-5.In this order, which curve is a long-run Phillips curve and which is a
short-run Phillips curve?
a. A, B
b. A, D
c. C, B
d. None of the above is correct.
The discount rate is the interest rate that
a. banks charge one another for loans.
b. banks charge the Fed for loans.
c. the Fed charges banks for loans.
d. the Fed charges Congress for loans.
Table 23-3
The table below contains data for the country of Crete for the year 2010.
RefertoTable23-3.What was Crete’s consumption in 2010?
a. $1810
b. $2013
c. $2315
d. $3131