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Macroeconomics is the study of
a. individual decision makers.
b. international trade.
c. economy-wide phenomena.
d. markets for large products.
The theory of efficiency wages provides a possible explanation as to why
a. workers form unions.
b. firms should try to reduce surpluses of labor.
c. firms may be inclined to keep their workers' wages above the equilibrium level.
d. firms may be inclined to keep their workers' wages below the equilibrium level.
Table 10-1
The table below contains data for country A for the year 2010.
Refer to Table 10-1. What were country A's imports in 2010?
a. -$32
b. $32
c. $88
d. $120
Consider a small economy in which consumers buy only two goods: apples and pears.
In order to compute the consumer price index for this economy for two or more
consecutive years, we assume that
a. the number of apples bought by the typical consumer is equal to the number of pears
bought by the typical consumer in each year.
b. neither the number of apples nor the number of pears bought by the typical consumer
changes from year to year.
c. the percentage change in the price of apples is equal to the percentage change in the
price of pears from year to year.
d. neither the price of apples nor the price of pears changes from year to year.
Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of
wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of
wheat per year. Each nation has 10 workers. For many years the two countries traded,
each completely specializing according to their respective comparative advantages.
Now, however, war has broken out between them and all trade has stopped. Without
trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per
year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. The war
has caused the combined yearly output of the two countries to decline by
a. 10 units of corn and 10 units of wheat.
b. 20 units of corn and 20 units of wheat.
c. 30 units of corn and 30 units of wheat.
d. 40 units of corn and 40 units of wheat.
Figure 9-10. The figure applies to Mexico and the good is rifles.
Refer to Figure 9-10. The price and quantity of rifles in Mexico before trade is
a. P0 and Q0.
b. P1 and Q1.
c. P2 and Q2.
d. P1 and Q0.
Buyers are able to buy all they want to buy and sellers are able to sell all they want to
sell at
a. prices at and above the equilibrium price.
b. prices at and below the equilibrium price.
c. prices above and below the equilibrium price, but not at the equilibrium price.
d. the equilibrium price but not above or below the equilibrium price.
As the number of stocks in a portfolio rises,
a. both firm-specific risks and market risk fall.
b. firm-specific risks fall; market risk does not.
c. market risk falls; firm-specific risks do not.
d. neither firm-specific risks nor market risk falls.
US citizens have better nutrition, better healthcare, and a longer life expectancy than
citizens of Ghana. Which of the following conclusions can be drawn from this
statement?
a. Average income in the US is higher than the average income in Ghana.
b. The US has a higher standard of living than Ghana.
c. Productivity in the US is higher than productivity in Ghana.
d. All of the above are correct.
Mia puts money into a piggy bank so she can spend it later. What function of money
does this illustrate?
a. store of value
b. medium of exchange
c. unit of account
d. None of the above is correct.
Consumer surplus is the
a. amount of a good consumers get without paying anything.
b. amount a consumer pays minus the amount the consumer is willing to pay.
c. amount a consumer is willing to pay minus the amount the consumer actually pays.
d. value of a good to a consumer.
According to purchasing power parity which of the following would happen if a
country raised its money supply growth rate?
a. its nominal exchange rate would fall
b. its real exchange rate would fall
c. its real net exports would rise
d. All of the above would happen.
Figure 21-5. On the figure, MS represents money supply and MD represents money
demand.
Refer to Figure 21-5. A shift of the money-demand curve from MD1 to MD2 could be
a result of
a. a decrease in taxes.
b. an increase in government spending.
c. an increase in the price level.
d. All of the above are correct.
Because of its effect on the amount of capital per worker, in the short term an increase
in the working population is likely to
a. raise productivity. Other things the same, this increase will be larger in a poor
country.
b. raise productivity. Other things the same, this increase will be larger in a rich country.
c. reduce productivity. Other things the same, this decrease will be larger in a poor
country.
d. reduce productivity. Other things the same, this decrease will be larger in a rich
country.
Which of the following is an example of a nonrenewable natural resource?
a. tin
b. petroleum
c. gold
d. All of the above are correct.
The Fed lowered interest rates in 2007 and 2008. This implies, other things the same,
that the Fed
a. increased the money supply because it was concerned about unemployment.
b. increased the money supply because it was concerned about inflation.
c. decreased the money supply because it was concerned about unemployment.
d. decreased the money supply because it was concerned about inflation.
Figure 2-3
Refer to Figure 2-3. At which point is this economy producing its maximum possible
quantity of pans?
a. J
b. L
c. M
d. N
Figure 4-13
Refer to Figure 4-13. The shift from S to S" could be caused by an
a. increase in the price of the good.
b. improvement in production technology.
c. increase in income.
d. increase in input prices.
The Bureau of Labor Statistics predicts that the number of jobs for dental hygienists
will grow faster than most occupations while the number of jobs for bookbinders will
decline. This change in the labor market could lead to
a. frictional unemployment created by efficiency wages.
b. structural unemployment created by efficiency wages.
c. frictional unemployment created by sectoral shifts.
d. structural unemployment created by sectoral shifts.
Free markets allocate (a) the supply of goods to the buyers who value them most highly
and (b) the demand for goods to the sellers who can produce them at least cost.
If the demand for loanable funds shifts to the left, then the equilibrium interest rate
a. and quantity of loanable funds rise.
b. and quantity of loanable funds fall.
c. rises and the quantity of loanable funds falls.
d. falls and the quantity of loanable funds rises.
Total surplus is represented by the area
a. under the demand curve and above the price.
b. above the supply curve and up to the price.
c. under the supply curve and up to the price.
d. between the demand and supply curves up to the point of equilibrium.
In which case(s) does(do) a country's demand for loanable funds shift right?
a. both an increase in the budget deficit and capital flight
b. an increase in the budget deficit, but not capital flight
c. capital flight, but not an increase in the budget deficit
d. neither an increase in the budget deficit nor capital flight
Using the graph, assume that the government imposes a $1 tariff on hammers. Answer
the following questions given this information.
a. What is the domestic price and quantity demanded of hammers after the tariff is
imposed?
b. What is the quantity of hammers imported before the tariff?
c. What is the quantity of hammers imported after the tariff?
d. What would be the amount of consumer surplus before the tariff?
e. What would be the amount of consumer surplus after the tariff?
f. What would be the amount of producer surplus before the tariff?
g. What would be the amount of producer surplus after the tariff?
h. What would be the amount of government revenue because of the tariff?
i. What would be the total amount of deadweight loss due to the tariff?
Figure 19-6
Refer to Figure 19-6. If equilibrium were at point h and the government imposed
quotas on imports of toys and textiles the equilibrium would move to
a. e
b. g
c. i
d. j
Net capital outflow equals the difference between a country's
a. income and expenditure.
b. investment and saving.
c. buying of foreign goods and services and sales of goods and services abroad.
d. purchases of foreign assets and sales of domestic assets abroad.
A firm in India hires a U.S. firm to provide economic forecasts. By itself this
transaction
a. increases U.S. exports and so increases the U.S. trade balance.
b. increases U.S. exports and so decreases the U.S. trade balance.
c. increases U.S. imports and so increases the U.S. trade balance.
d. increases U.S. imports and so decreases the U.S. trade balance.
A leading environmental group recently published a report contending that humans are
running a "resource deficit" because we are using natural resources faster than they can
be regenerated. The group claims that this means that economic growth will eventually
stop, and will even be reversed. An economist would
a. agree with the report, and would point to rising natural resource prices as evidence.
b. agree with the report, but wouldn't think it was important because growth will not
slow down for several centuries.
c. disagree with the report, in part because it ignores the mitigating effects of
technological change.
d. disagree with the report because labor and capital are the primary determinants of
growth, and since they are plentiful, growth will not slow down.
Figure 6-14
The vertical distance between points A and B represents the tax in the market.
Refer to Figure 6-14. The per-unit burden of the tax on sellers is
a. $6.
b. $8.
c. $10.
d. $14.
If macaroni and cheese is an inferior good, what would happen to the equilibrium price
and quantity of macaroni and cheese if consumers' incomes rise?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
A professional gambler moves from a state where gambling is illegal to a state where
gambling is legal. Most of his income was, and continues to be, from gambling. His
move
a. raises GDP.
b. decreases GDP.
c. doesn't change GDP because gambling is never included in GDP.
d. doesn't change GDP because in either case his income is included.
A Korean steel company produces steel in the United States, with some of its steel
being exported to other nations and some of it being sold within the United States. If the
prices of this steel increase, then
a. the GDP deflator and the CPI will both increase.
b. the GDP deflator will increase and the CPI will be unchanged.
c. the GDP deflator will be unchanged and the CPI will increase.
d. the GDP deflator and the CPI will both be unchanged.
Which of the following groups is largely responsible for carrying out the Fed's tasks of
regulating banks and ensuring the health of the financial system?
a. FOMC
b. the Board of Governors
c. the New York Fed
d. the regional Federal Reserve Banks
The phrase "no such thing as a free lunch" means
a. people must face tradeoffs.
b. rational people think at the margin.
c. people respond to incentives.
d. trade can make everyone better off.
The U.S. economy has never experienced deflation.
When a variable that is named on an axis of a graph changes, the curve shifts.
Total surplus in a market can be measured as the area below the supply curve plus the
area above the demand curve, up to the point of equilibrium.
The real interest rate tells you how fast the purchasing power of your bank account rises
over time.
If not all prices adjust instantly to changing economic circumstances, an unexpected fall
in the price level leaves some firms with higher-than-desired prices, and these
higher-than-desired prices depress sales and induce firms to reduce the quantity of
goods and services they produce.
If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is
$35.
For economists, conducting experiments is often difficult and sometimes impossible.
If the price of calculators increases by 15 percent and the quantity demanded per week
falls by 45 percent as a result, then the price elasticity of demand is 3.
Policies that reduce the time it takes unemployed workers to find new jobs can reduce
the economy's natural rate of unemployment.
If the cross-price elasticity of demand for two goods is negative, then the two goods are
substitutes.
Measures of elasticity enhance our ability to study the magnitudes of changes in
quantities in response to changes in prices or income.
In the open-economy macroeconomic model, the supply of dollars in the market for
foreign-currency exchange is upward sloping.
If a line passes through the points (20,5) and (10,10), then the slope of the line is 1/2.
In the long-run, an increase in aggregate demand increases the price level, but not real
GDP.
If the size of a tax triples, the deadweight loss increases by a factor of six.
What does the text mean by the question, "Where Is All the Currency?" How does it
answer the question?
Even though monetary policy is neutral in the short run, it may have profound real
effects in the long run.
A tax on sellers increases the quantity of the good sold in the market.
If a Dutch firm buys goods from a U.S. firm with dollars it obtains by exchanging euros
for dollars, both U.S. net exports and U.S. net capital outflow increase.
Trade allows all countries to achieve greater prosperity.
