There is no shortage of scarce resources in a market economy because
a. the government makes shortages illegal.
b. resources are abundant in market economies.
c. prices adjust to eliminate shortages.
d. quantity supplied is always greater than quantity demanded in market economies.
Figure 28-4
RefetoFigure28-4.If 6,000 workers are unemployed, then the minimum wage must be
a. $1.
b. $4.
c. $6.
d. $7.
The term crowdingoutrefers to decreases in the interest rate caused by government
budget surpluses.
a. True
b. False
Members of the Board of Governors of the Federal Reserve System are appointed for
life.
a. True
b. False
World Wide Delivery Service Corporation develops a way to speed up its deliveries and
reduce its costs. We would expect that this would
a. raise the demand for existing shares of the stock, causing the price to rise.
b. decrease the demand for existing shares of the stock, causing the price to fall.
c. raise the supply of the existing shares of stock, causing the price to rise.
d. raise the supply of the existing shares of stock, causing the price to fall.
A 1977 amendment to the Federal Reserve Act of 1913
a. requires the Federal Reserve to place more weight on promoting price stability than
on promoting maximum employment.
b. requires the Federal Reserve to place more weight on promoting maximum
employment than on promoting price stability.
c. requires the Federal Reserve to place equal weight on promoting price stability and
maximum employment.
d. says the Federal Reserve should promote price stability and maximum employment,
but does not specify how the Federal Reserve should weight these goals.
If the current year CPI is 140, then the price level has increased 40 percent since the
base year.
a. True
b. False
Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond
issued by a U.S. company. This transaction
a. decreases U.S. net capital outflow.
b. does not change U.S. net capital outflow.
c. increases U.S. net capital outflow by more than the value of the bond.
d. increases U.S. net capital outflow by the value of the bond.
If there is a surplus of loanable funds, the quantity demanded is
a. greater than the quantity supplied and the interest rate will rise.
b. greater than the quantity supplied and the interest rate will fall.
c. less than the quantity supplied and the interest rate will rise.
d. less than the quantity supplied and the interest rate will fall.
If people correctly anticipate that inflation will fall by 1%, then
a. the short-run Phillips curve shifts right and unemployment is unchanged.
b. the short-run Phillips curve shifts right and unemployment rises.
c. the short-run Phillips curve shifts left and unemployment is unchanged.
d. the short-run Phillips curve would shift left and unemployment falls.
Figure 33-8.
RefertoFigure33-8. Suppose the economy starts at Z. Stagflation would be consistent
with the move to
a. P1and Y1.
b. P1and Y3.
c. P3and Y1.
d. P3and Y3.
Ashley bakes bread that she sells at the local farmer’s market. If she purchases a new
convection oven that reduces the costs of baking bread, the
a. supply curve for Ashley’s bread will increase.
b. supply curve for Ashley’s bread will decrease.
c. demand curve for Ashley’s bread will increase.
d. demand curve for Ashley’s bread will decrease.
A decrease in supply is represented by a
a. movement downward and to the left along a supply curve.
b. movement upward and to the right along a supply curve.
c. rightward shift of a supply curve.
d. leftward shift of a supply curve.
If the central bank increases the growth rate of the money supply and initially inflation
expectations are unchanged, then in the short run
a. unemployment rises. In the long run the short-run Phillips curve shifts left.
b. unemployment rises. In the long run the short-run Phillips curve shifts right.
c. unemployment falls. In the long run the short-run the Phillips curve shifts left.
d. unemployment falls. In the long run the short-run the Phillips curve shifts right.
Suppose that U.S. mining companies purchase German-made ore trucks at a reduced
price. By itself, what effect will this purchase have on the GDP deflator and on the
consumer price index?
a. The consumer price index and the GDP deflator will both fall.
b. The consumer price index and the GDP deflator will both be unaffected.
c. The consumer price index will fall, and the GDP deflator will be unaffected.
d. The consumer price index will be unaffected, and the GDP deflator will fall.
Which of the following statements is correct?
a. The total income in the economy that remains after paying for consumption and
government purchases is called privatesaving.
b. The sum of private saving and national saving is called publicsaving.
c. For a closed economy, the sum of private saving and public saving must equal
investment.
d. For a closed economy, the sum of consumption, national saving, and taxes must
equal GDP.
Which of the following is not an example of a positive, as opposed to normative,
statement?
a. Higher gasoline prices will reduce gasoline consumption.
b. Equality is more important than efficiency.
c. Trade restrictions lower our standard of living.
d. If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of
money.
Figure 3-14
Refer to Figure3-14. Suppose Arturo is willing to trade 6 burritos to Dina for each 10
tacos that Dina produces and sends to Arturo. Which of the following combinations of
tacos and burritos could Dina then consume, assuming Dina specializes in taco
production and Arturo specializes in burrito production?
a. 100 tacos and 200 burritos
b. 200 tacos and 130 burritos
c. 300 tacos and 60 burritos
d. 340 tacos and 40 burritos
As the price level rises, the interest rate
a. falls, so the supply of dollars in the market for foreign currency exchange shifts left.
b. falls, so the supply of dollars in the market for foreign currency exchange shifts right.
c. rises, so the supply of dollars in the market for foreign currency exchange shifts left.
d. rises, so the supply of dollars in the market for foreign currency exchange shifts
right.
All of the presidents of the regional Federal Reserve banks
a. attend each FOMC meeting.
b. have voting rights at each FOMC meeting.
c. are appointed by the president of the U.S. and confirmed by the U.S. Senate.
d. All of the above are correct.
Which of the following is an example of menu costs?
a. deciding on new prices
b. printing new price lists
c. advertising new prices
d. All of the above are examples of menu costs.
Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend
financial institutions funds. When the Fed did this, it was acting in its role of lender of
last resort.
a. True
b. False
Figure30-3. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
RefetoFigure30-3. If the relevant money-supply curve is the one labeled MS2, then
a. when the money market is in equilibrium, one dollar purchases about one-third of a
basket of goods and services.
b. when the money market is in equilibrium, one unit of goods and services sells for 33
cents.
c. there is an excess demand for money if the value of money in terms of goods and
services is 0.5.
d. All of the above are correct.
With the value of money on the vertical axis, the money supply curve is
a. upward-sloping.
b. downward-sloping.
c. horizontal.
d. vertical.
A competitive market is a market in which
a. an auctioneer helps set prices and arrange sales.
b. there are only a few sellers.
c. the forces of supply and demand do not apply.
d. no individual buyer or seller has any significant impact on the market price.
DeShawn has spent $600 purchasing and repairing an old fishing boat, which he
expects to sell for $900 once the repairs are complete. DeShawn discovers that, in
addition to the $600 he has already spent, he needs to make an additional repair, which
will cost another $400, in order to make the boat worth $900 to potential buyers. He can
sell the boat as it is now for $400. What should he do?
a. He should sell the boat as it is now for $400.
b. He should keep the boat since it would not be rational to spend $1,000 on repairs and
then sell the boat for $900.
c. He should complete the repairs and sell the boat for $900.
d. It does not matter which action he takes; the outcome is the same either way.
Which of the following phrases best captures the notion of efficiency?
a. absolute fairness
b. equal distribution
c. minimum waste
d. equitable outcome
Which of the following is correct?
a. Countries with the highest growth rates over the last 120 years are the ones that had
the highest level of real GDP 120 years ago.
b. Most countries have had little fluctuation around their average growth rates during
the past 120 years.
c. The ranking of countries by income changes little over time.
d. Even though Japan had a higher growth rate of real GDP per person than the U.S.
over the last 120 years, it’s
level of real GDP per person is less than that of the U.S.
La Rossa Pasta Company is considering expanding its factory. In which case would
both the change in the cost and the change in the interest rate each make it less likely
that La Rossa’s would expand?
a. a decrease in the cost of expanding and a decrease in the interest rate.
b. a decrease in the cost of expanding and an increase in the interest rate.
c. an increase in the cost of expanding and a decrease in the interest rate.
d. an increase in the cost of expanding and an increase in the interest rate.
Figure 3-20
Refer to Figure3-20. If Canada and Mexico switch from each country dividing its time
equally between the production of Good X and Good Y to each country spending all of
its time producing the good in which it has a comparative advantage, then total
production of Good Y will increase by
a. 3 units.
b. 6 units.
c. 9 units.
d. 12 units.
Index funds
a. buy all the stocks in a given stock index.
b. promise to beat the market by a certain percentage known as an index.
c. provide a return that is adjusted for changes in the consumer price index.
d. buy industries within a particular category of the North American Industry
Classification System.
During the 2008 financial crisis velocity decreased. This means that the rate at which
money changed hands
a. decreased. Other things the same, a decrease in velocity decreases the price level.
b. decreased. Other things the same, a decrease in velocity increases the price level.
c. increased. Other things the same, an increase in velocity decreases the price level.
d. increased. Other things the same, an increase in velocity increases the price level.
Which of the following statements best captures the relationship between
microeconomics and macroeconomics?
a. For the most part, microeconomists are unconcerned with macroeconomics, and
macroeconomists are unconcerned with microeconomics.
b. Microeconomists study markets for small products, whereas macroeconomists study
markets for large products.
c. Microeconomics and macroeconomics are distinct from one another, yet they are
closely related.
d. Microeconomics is oriented toward policy studies, whereas macroeconomics is
oriented toward theoretical studies.
Which of the following support the idea that monetary policy should be made by a rule?
a. the political business cycle and the time-inconsistency problem
b. the political business cycle but not the time-inconsistency problem
c. the time-inconsistency problem, but not the political business cycle
d. neither the political business cycle nor the time-inconsistency problem
At the end of World War II many European countries were rebuilding and so were eager
to buy capital goods and had rising incomes. We would expect that the rebuilding
increased aggregate demand in
a. both the United States and Europe.
b. the United States but not Europe.
c. Europe, but not the United States.
d. neither the United States, nor Europe.