Suppose that a labor union leader is trying to bargain for an increase in union workers’
real wages of 5 percent. If he expected the price level to rise at a rate of 3 percent this
year, how much would nominal wages need to increase for him to accomplish his
objective?
a. 2 percent
b. 3 percent
c. 5 percent
d. 8 percent
e. 15 percent
The three problems of resource allocation are faced by
a. traditional societies
b. command systems
c. centrally planned economies
d. market economies
e. all types of societies
Before about 1975
a. any federal deficits were at least 5 percent of GDP.
b. most federal deficits were less than 2 percent of GDP.
c. the federal government never ran deficits.
d. the federal government always ran a surplus.
e. any federal deficits were at least 7 percent of GDP.
The principle of specialization and exchange implies that
a. total production is highest when individuals specialize according to their absolute
advantages
b. productive inefficiency increases as producers in society specialize
c. exchange can only occur when there is specialization in the economy
d. gains from specialization will only occur when society is operating at a point along
its production possibilities frontier
e. total production is highest when individuals specialize according to their comparative
advantages
A student seeking a job right after graduation should be especially attentive to
a. long-run growth patterns in the economy
b. what is the current phase of the business cycle
c. technological change
d. sales of durable goods
e. the duration of strikes
One of the most serious effects of a banking panic is that
a. banks will not earn as much profit
b. banks will no longer be trusted by the public
c. people will not place their excess money in banking accounts
d. people may lose any accrued interest on their accounts
e. large withdrawals of cash lead to a severe decrease in reserves and ultimately in the
money supply
If Mexico’s GDP drops, which of the following will happen in the market for pesos?
a. A rightward shift of the supply curve, a depreciation of the peso, and a larger number
of pesos traded
b. A rightward shift of the demand curve, a depreciation of the peso, and a smaller
number of pesos traded
c. A rightward shift of the demand curve, an appreciation of the peso, and a larger
number of pesos traded
d. A leftward shift of the demand curve, a depreciation of the peso, and a smaller
number of pesos traded
e. A leftward shift of the supply curve, an appreciation of the peso, and a smaller
number of pesos traded.
Classical economists believed that the economy would always return to full
employment.
Which of the following could explain a movement from point F to point G in Figure
3-2? Assume that the good represented is an inferior good.
a. all of the following are correct
b. an increase in buyers’ incomes
c. a decrease in the expected future price of the good
d. an increase in the price of the good
e. an increase in the price of a complement
Recessions are identified by
a. severe and long-lasting phases of decreased output
b. high employment
c. constant output
d. decreasing output
e. low unemployment
When individuals come together to buy and sell goods and services, they form a(n)
a. economy
b. market
c. production possibilities frontier
d. supply curve
e. demand curve
The money demand curve is
a. downward sloping
b. upward sloping
c. horizontal
d. vertical
e. has an inverted V-shape
Banks can create
a. income
b. power
c. wealth
d. money
e. capital stock
All of the following, except one, would increase the demand for a particular model of a
Ford automobile. Assume that this model is a normal good. Which is the exception?
a. an increase in buyers’ incomes
b. increased prices of other Ford models
c. an expected future increase in the price
d. an increase in the U.S. population
e. a decrease in the price of steel
How do people in a market economy obtain income that is used to buy goods and
services?
a. Supplying labor and other resources to firms
b. Trading goods and services in a barter system
c. Selling goods and services to each other
d. None of the above
e. b and c
A payment that is periodically adjusted in proportion to a price index such as the CPI is
known as a(n)
a. unionized payment.
b. indexed payment.
c. scaled payment.
d. inflated payment.
e. adjusted payment.
If a lender charged a 9 percent nominal interest rate and the expected inflation rate is 4
percent, what is the difference between the real rate the lender received and the real rate
the lender expected when actual inflation ended up being 2 percent?
a. 2 percent
b. 4 percent
c. -4 percent
d. 1 percent
e. 0 percent
The quantity demanded of a good
a. is the amount that would be purchased with an unlimited income
b. is the amount that would be demanded even if income were zero
c. is subject to the buyer’s income constraints
d. is a fixed amount unaffected by the buyer’s circumstances
e. must match the amount actually purchased in the market
GDP as predicted by the classical model is
a. lower than the actual level of GDP
b. higher than the actual level of GDP
c. smoother and steadier than actual GDP
d. more unstable over time than actual GDP
e. an accurate predictor of actual GDP
Macroeconomics is best suited to answering questions such as
a. what determines the unemployment rate among students on this campus
b. why rent is higher in big cities than in smaller ones
c. how fast the overall price level will rise next year
d. what determines the demand for public transportation in rural areas
e. why sales taxes in this area are increasing