Treasury Bonds are
a. liquid, but not a store of value.
b. a store of value, but not liquid.
c. both liquid and a store of value.
d. neither liquid nor a store of value.
Suppose a stock market crash makes people feel poorer. This decrease in wealth would
induce people to
a. decrease consumption, which shifts aggregate supply left.
b. decrease consumption, which shifts aggregate demand left.
c. increase consumption, which shifts aggregate supply right.
d. increase consumption, which shifts aggregate demand right.
A bakery would be willing to supply 500 donuts per day at a price of $0.50 each. At a
price of $0.80, the bakery would be willing to supply 1,100 donuts. Using the midpoint
method, the price elasticity of supply for donuts is about
a. 0.62, and supply is elastic.
b. 0.62, and supply is inelastic.
c. 1.63, and supply is elastic.
d. 1.63, and supply is inelastic.
The burden of a luxury tax falls
a. more on the rich than on the middle class.
b. more on the poor than on the rich.
c. more on the middle class than on the rich.
d. equally on the rich, the middle class, and the poor.
A firm in China sells toys to a U.S. department store chain. Other things the same, these
sales
a. increase U.S. net exports and decrease Chinese net exports.
b. decrease U.S. net exports and increase Chinese net exports.
c. increase U.S. and Chinese net exports.
d. decrease U.S. and Chinese net exports.
If demand is price inelastic, then when price rises, total revenue
a. will fall.
b. will rise.
c. will remain unchanged.
d. may rise, fall, or remain unchanged. More information is need to determine the
change in total revenue with certainty.
Other things the same, the real exchange rate between American and Chinese goods
would be higher if
a. prices of Chinese goods were higher, or the number of yuan a dollar purchased was
higher.
b. prices of Chinese goods were higher, or the number of yuan a dollar purchased was
lower.
c. prices of Chinese goods were lower, or the number of yuan a dollar purchased was
higher.
d. prices of Chinese goods were lower, or the number of yuan a dollar purchased was
lower.
If the government removes a binding price ceiling from a market, then the price
received by sellers will
a. decrease, and the quantity sold in the market will decrease.
b. decrease, and the quantity sold in the market will increase.
c. increase, and the quantity sold in the market will decrease.
d. increase, and the quantity sold in the market will increase.
Scenario 21-2. The following facts apply to a small, imaginary economy.
Consumption spending is $5,200 when income is $8,000.
Consumption spending is $5,536 when income is $8,400.
Refer to Scenario 21-2. For this economy, an initial increase of $500 in government
purchases translates into a
a. $1,428.57 increase in aggregate demand in the absence of the crowding-out effect.
b. $3,125.00 increase in aggregate demand in the absence of the crowding-out effect.
c. $1,428.57 increase in aggregate demand when the crowding-out effect is taken into
account.
d. $3,125.00 increase in aggregate demand when the crowding-out effect is taken into
account.
The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate
during this period was 4.5 percent. What was the real interest rate during this period?
a. – 0.75 percent
b. – 0.5 percent
c. 9.5 percent
d. 9.75 percent
Which of the following is not a cause of the decline in the U.S. men’s labor-force
participation rate over the past several decades?
a. young men now stay in school longer than their fathers and grandfathers did
b. older men now retire earlier and live longer
c. with more women employed, there are fewer jobs now available to men
d. more fathers now stay at home to raise their children
Because a government budget deficit represents
a. negative public saving, it increases national saving.
b. negative public saving, it decreases national saving.
c. positive public saving, it increases national saving.
d. positive public saving, it decreases national saving.
Scenario 9-2
For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
,
where represents the domestic quantity of cardboard demanded, in tons, and
represents the price of a ton of cardboard.
For Boxland, the equation of the domestic supply curve for cardboard is
,
where represents the domestic quantity of cardboard supplied, in tons, and again
represents the price of a ton of cardboard.
Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then, relative to
the no-trade situation, international trade in cardboard
a. benefits Boxlandian consumers by $750 and harms Boxlandian producers by $660.
b. harms Boxlandian consumers by $736 and harms Boxlandian producers by $598.
c. harms Boxlandian consumers by $704 and benefits Boxlandian producers by $864.
d. harms Boxlandian consumers by $804 and benefits Boxlandian producers by $984.
You have driven 500 miles on a vacation and then you notice that you are only 25 miles
from an attraction you hadn”t known about, but would really like to see. In computing
the opportunity cost of visiting this attraction you had not planned to visit, you should
include
a. both the cost of driving the first 500 and the next 25 miles.
b. the cost of driving the first 500 miles, but not the cost of driving the next 25.
c. the cost of driving the next 25 miles, but not the cost of driving the first 500.
d. neither the cost of driving the first 500 miles nor the cost of driving the next 25
miles.
In the short run,
a. unemployment and inflation are positively related. In the long run they are largely
unrelated problems.
b. and in the long run inflation and unemployment are positively related.
c. unemployment and inflation are negatively related. In the long run they are largely
unrelated problems.
d. and in the long run inflation and unemployment are negatively related.
Which of the following nations experienced average rates of economic growth of less
than 2 percent over the last 100 years?
a. Bangladesh
b. Pakistan
c. United Kingdom
d. All of the above are correct.
Demand deposits are a type of
a. checking account.
b. time deposit.
c. money market mutual fund.
d. savings deposit.
Figure 6-15
Refer to Figure 6-15. Suppose a tax of $2 per unit is imposed on this market. How
much will buyers pay per unit after the tax is imposed?
a. $3
b. between $3 and $5
c. between $5 and $7
d. $7
Suppose there is a decrease in short-run aggregate supply. If the Federal Reserve wants
to stabilize output it should
a. buy bonds. These purchases also move the price level closer to its original level.
b. buy bonds. However these purchases move the price level farther from its original
level.
c. sell bonds. These purchases also move the price level closer to its original level.
d. sell bonds. However these purchase move the price level farther from its original
level.
Suppose that M is fixed but that P falls. According to the quantity equation which of the
following could both by themselves explain the decrease in P?
a. Y rose, V rose
b. Y fell, V fell
c. Y rose, V fell
d. Y fell, V rose
When a binding price floor is imposed on a market,
a. price no longer serves as a rationing device.
b. the quantity demanded at the price floor exceeds the quantity that would have been
demanded without the price floor.
c. all sellers benefit.
d. All of the above are correct.
Social Security payments are indexed for inflation using the CPI. A recent newspaper
editorial claimed that Social Security recipients are harmed by years of low inflation
because they do not receive as large an increase in their payments as they do in years of
high inflation. Which of the following statements is correct?
a. The newspaper editorial is correct under all circumstances.
b. The newspaper editorial is correct if the market basket consumed by Social Security
recipients is the same as the market basket used to compute the CPI.
c. The newspaper editorial could be correct if the prices of the goods consumed by
Social Security recipients change at a different rate than the prices of the goods in the
market basket used to compute the CPI
d. The newspaper editorial is incorrect under all circumstances.
When the Fed buys government bonds,
a. the money supply increases and the federal funds rate increases.
b. the money supply increases and the federal funds rate decreases.
c. the money supply decreases and the federal funds rate increases.
d. the money supply decreases and the federal funds rate decreases.
Suppose that more British decide to vacation in the U.S. and that the British purchase
more U.S. Treasury bonds. Ignoring how payments are made for these purchases,
a. the first action by itself raises U.S. net exports, the second action by itself raises U.S.
net capital outflow.
b. the first action by itself raises U.S. net exports, the second action by itself lowers
U.S. net capital outflow.
c. the first action by itself lowers U.S. net exports, the second action by itself raises
U.S. net capital outflow.
d. the first action by itself lowers U.S. net exports, the second action by itself lowers
U.S. net capital outflow.
Which of the following could be the price elasticity of demand for a good for which a
decrease in price would increase revenue?
a. 0
b. 0.2
c. 1
d. 2.1
If the central bank in some country lowered the reserve requirement, then the money
multiplier for that country
a. would increase.
b. would not change.
c. would decrease.
d. could do any of the above.
Brittany wants to have about $500,000 when she retires in 10 years. She has $200,000
to deposit now. At which of the following interest rates would her deposit come closest
to $500,000 after 10 years?
a. 9.6 percent
b. 9.8 percent
c. 10 percent
d. 10.2 percent
If the efficient markets hypothesis is 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.
Matthew bakes apple pies that he sells at the local farmer’s market. If the price of apples
increases, the
a. supply curve for Matthew’s pies will increase.
b. supply curve for Matthew’s pies will decrease.
c. demand curve for Matthew’s pies will increase.
d. demand curve for Matthew’s pies will decrease.
Countries that restrict foreign trade are likely to
a. forgo the additional surplus that trade allows, but will probably enjoy economies of
scale.
b. forgo the additional surplus that trade allows, but will be compensated by a higher
rate of technological change.
c. forgo the additional surplus that trade allows, but will have a lower rate of
unemployment.
d. have more firms with domestic market power.
Which of the following is the most likely explanation for the imposition of a price floor
on the market for corn?
a. Policymakers have studied the effects of the price floor carefully, and they recognize
that the price floor is advantageous for society as a whole.
b. Buyers and sellers of corn have agreed that the price floor is good for both of them
and have therefore pressured policy makers into imposing the price floor.
c. Buyers of corn, recognizing that the price floor is good for them, have pressured
policymakers into imposing the price floor.
d. Sellers of corn, recognizing that the price floor is good for them, have pressured
policymakers into imposing the price floor.
Initially, the economy is in long-run equilibrium. Aggregate demand then shifts leftward
by $50 billion. The government wants to increase its spending in order to avoid a
recession. If the crowding-out effect is always half as strong as the multiplier effect, and
if the MPC equals 0.8, then by how much do government purchases have to increase in
order to offset the $50 billion leftward shift?
a. by $5 billion
b. by $10 billion
c. by $20 billion
d. by $50 billion
Figure 2-4
Refer to Figure 2-4. If this economy devotes all of its resources to the production of
notepads, then it will produce
a. 0 notepads and 40 lamps.
b. 35 notepads and 20 lamps.
c. 70 notepads and 0 lamps.
d. 70 notepads and 40 lamps.
Which of the following is not a determinant of demand?
a. the price of a resource that is used to produce the good
b. the price of a complementary good
c. the price of the good next month
d. the price of a substitute good
Which of the following can policy do?
a. alter incentives
b. alter trade-offs
c. change opportunity costs
d. All of the above are correct.