A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other
things the same, U.S. net exports
a. increase, and U.S. net capital outflow increases.
b. increase, and U.S. net capital outflow decreases.
c. decrease, and U.S. net capital outflow increases.
d. decrease, and U.S. net capital outflow decreases.
Figure 19-2
Refer to Figure 19-2. At what real exchange rate is the quantity of dollars demanded
equal to 100?
a. 1.4
b. 1
c. 0.6
d. None of the above are correct.
Figure 7-10
Refer to Figure 7-10. If the equilibrium price rises from $50 to $200, what is the
additional producer surplus to initial producers?
a. $625
b. $3,750
c. $5,625
d. $10,000
In the open-economy macroeconomic model, the key determinant of net capital outflow
is
a. the real exchange rate. When the real exchange rate rises, net capital outflow rises.
b. the real exchange rate. When the real exchange rate rises, net capital outflow falls.
c. the real interest rate. When the real interest rate rises, net capital outflow rises.
d. the real interest rate. When the real interest rate rises, net capital outflow falls.
A good is produced by a firm in 2010, added to the firm’s inventory in 2010, and sold to
a household in 2011. It follows that
a. the value of the good is added to the investment category of 2010 GDP, added to the
consumption category of 2011 GDP, and subtracted from the investment category of
2011 GDP.
b. the value of the good is added to the investment category of 2010 GDP, added to the
consumption category of 2011 GDP, and not included in the investment category of
2011 GDP.
c. the value of the good is added to the investment category of 2010 GDP, subtracted
from the consumption category of 2011 GDP, and not included in the investment
category of 2011 GDP.
d. the value of the good is added to the investment category of 2010 GDP, subtracted
from the consumption category of 2011 GDP, and added to the investment category of
2011 GDP.
A movement upward and to the right along a supply curve is called a(n)
a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.
The consumption component of GDP includes spending on
a. durable goods and nondurable goods, but not spending on services.
b. durable goods and services, but not spending on nondurable goods.
c. nondurable goods and services, but not spending on durable goods.
d. durable goods, nondurable goods, and services.
Figure 17-2. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
Refer to Figure 17-2. Suppose the relevant money-demand curve is the one labeled
MD1; also suppose the velocity of money is 3. If the money market is in equilibrium,
then the economy’s real GDP amounts to
a. 5,000.
b. 7,500.
c. 10,000.
d. 15,000.
In which of the following cases would the quantity of money demanded be largest?
a. r = 0.03, P = 1.2
b. r = 0.03, P = 1.3
c. r = 0.04, P = 1.2
d. r = 0.05, P = 0.9
The equation: quantity of output supplied = natural rate of output + a(actual price level
– expected price level), where a is a positive number, represents
a. an upward-sloping short-run aggregate supply curve
b. a vertical short-run aggregate supply curve
c. a downward-sloping aggregate demand curve
d. None of the above is correct.
Suppose Guatemala has an absolute advantage over other countries in producing sugar,
but other countries have a comparative advantage over Guatemala in producing sugar. If
trade in sugar is allowed, Guatemala
a. will import sugar.
b. will export sugar.
c. will either export sugar or export sugar, but it is not clear from the given information.
d. would have nothing to gain either from exporting or importing sugar.
For which of the following goods is the income elasticity of demand likely lowest?
a. water
b. sapphire pendant necklaces
c. filet mignon steaks
d. fresh fruit
Which of the following is not included in either M1 or M2?
a. money market deposit accounts
b. large time deposit
c. demand deposits
d. money market mutual funds
Table 10-7
The table below contains data for the country of Togogo. The base year is 1974.
Refer to Table 10-7. From 1976 to 1977,
a. inflation was 33.3% and output grew at a rate of 20%.
b. inflation was 33.3% and output grew at a rate of 60%.
c. inflation was 50% and output grew at a rate of 20%.
d. inflation was 50% and output grew at a rate of 60%.
Who can vote on Federal Open Market Committee decisions?
a. all of the members of the Board of Governors and all of the Federal Reserve Bank
presidents
b. all of the members of the Board of Governors and some of the Federal Reserve Bank
presidents
c. some of the members of the Board of Governors and all of the Federal Reserve Bank
presidents
d. some of the members of the Board of Governors and some of the Federal Reserve
Bank presidents
In a competitive market free of government regulation,
a. price adjusts until quantity demanded is greater than quantity supplied.
b. price adjusts until quantity demanded is less than quantity supplied.
c. price adjusts until quantity demanded equals quantity supplied.
d. supply adjusts to meet demand at every price.
Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million
bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles.
Which of the following statements is true?
a. The demand for ginger ale is income inelastic, so an increase in the price of ginger
ale will increase the total revenue of ginger ale producers.
b. The demand for ginger ale is income elastic, so an increase in the price of ginger ale
will increase the total revenue of ginger ale producers.
c. The demand for ginger ale is price inelastic, so an increase in the price of ginger ale
will increase the total revenue of ginger ale producers.
d. The demand for ginger ale is price elastic, so an increase in the price of ginger ale
will decrease the total revenue of ginger ale producers.
If you were to start a business delivering documents, you might need to purchase cell
phones, bicycles, desks, and chairs.
a. These purchases are called capital investment. If you raise the funds to purchase them
from others you are a saver.
b. These purchases are called capital investment. If you raise the funds to purchase them
from others you are a borrower.
c. These purchases are called consumption. If you raise the funds to purchase them from
others you are a saver.
d. These purchases are called consumption. If you raise the funds to purchase them
from others you are a borrower.
Despite its status as one of the richest countries in the world, Japan
a. has a very low level of productivity.
b. has few natural resources.
c. has very little human capital.
d. engages in a relatively small amount of international trade.
Which of the following is an example of an adverse supply shock?
a. a decrease in the money supply
b. a tax cut
c. a worldwide drought
d. decreased government spending
If the Federal Reserve increases the rate at which it increases the money supply, then
unemployment is lower
a. in the long run and the short run.
b. in the long run but not the short run.
c. in the short run but not the long run.
d. in neither the short run nor the long run.
Frictional unemployment results from
a. job searching. It is often thought to explain relatively short spells of unemployment.
b. job searching. It is often thought to explain relatively long spells of unemployment
c. a surplus in the some labor markets. It is often thought to explain relatively short
spells of unemployment.
d. a surplus in some labor markets. It is often thought to explain relatively long spells of
unemployment.
On the Internet you find the following offers for opening an online account. Which of
them is the best offer if you have $2,000 to save for two years?
a. an interest rate of 5 percent, with the bank charging you a $15 processing fee at the
time you open your account
b. an interest rate of 3.5 percent, with the bank giving you a $35 bonus to open your
account
c. an interest rate of 4 percent, with the bank giving you a $20 bonus at the time you
open your account
d. an interest rate of 4.5 percent, with no processing fee and no bonus
Prices in both the U.S. and China rise, but prices in China increase by a smaller
percentage. According to purchasing-power parity the U.S. dollar
a. gains value both in terms of the domestic goods and services it can buy and in terms
of the Chinese currency it can buy.
b. gains value in terms of the domestic goods and services it can buy, but loses value in
terms of the Chinese currency it can buy.
c. loses value in terms of the domestic goods and services it can buy, but gains value in
terms of the Chinese currency it can buy.
d. loses value both in terms of the domestic goods and services it can buy and in terms
of the Chinese currency it can buy.
If the reserve ratio is 10 percent, banks do not hold excess reserves, people hold only
deposits and no currency, then when the Fed sells $10 million worth of bonds to the
public, bank reserves
a. increase by $1 million and the money supply eventually increases by $10 million.
b. increase by $10 million and the money supply eventually increases by $100 million.
c. decrease by $1 million and the money supply eventually increases by $10 million.
d. decrease by $10 million and the money supply eventually decreases by $100 million.
The consumption of water by local residents that may include pesticide runoff from
local farmers’ fields is an example of
a. market equilibrium.
b. market power.
c. externalities.
d. laissez-faire.
Educated people may generate ideas that increase production. These ideas
a. produce a return to society from education that is greater than the return to the
individual.
b. could justify government subsides for education.
c. are external benefits of education.
d. All of the above are correct.
Who of the following would be included in the Bureau of Labor Statistics’
“unemployed” category?
a. Cambry, a full-time student who is not looking for work
b. Eric, who is on temporary layoff
c. Carson, who has retired and is not looking for work
d. All of the above are correct.
Suppose the government deficit increases, but the interest rate remains the same. Which
of the following things might have happened simultaneously to keep interest rates the
same?
a. The government reduces the amount that people may put into savings accounts on
which the interest is tax exempt.
b. Because they are optimistic about the future of the economy, firms desire to borrow
more to purchase physical capital.
c. Consumers decide to decrease consumption and work more.
d. All of the above could explain why the interest rate would be unchanged.
Economists make assumptions in order to
a. mimic the methodologies employed by other scientists.
b. minimize the number of experiments that yield no useful data.
c. minimize the likelihood that some aspect of the problem at hand is being overlooked.
d. focus their thinking on the essence of the problem at hand.
Most economists believe that a cut in tax rates
a. would generally increase government tax revenue.
b. would have no effect on aggregate demand.
c. has a relatively small effect on the aggregate-supply curve.
d. All of the above are correct.
Which of the following could explain a decrease in the equilibrium interest rate and in
the equilibrium quantity of loanable funds?
a. The demand for loanable funds shifted rightward.
b. The demand for loanable funds shifted leftward.
c. The supply of loanable funds shifted rightward.
d. The supply of loanable funds shifted leftward.