Figure26-4.On the horizontal axis of the graph, Lrepresents the quantity of loanable
funds in billions of dollars.
RefertoFigure26-4. Regard the position of the Supply curve as fixed, as on the graph.
If the real interest rate is 8 percent, the inflation rate is 3 percent, and the market for
loanable funds is in equilibrium, then the position of the demand-for-loanable-funds
curve must be
a. D1.
b. D2.
c. between D1 and D2.
d. to the right of D2.
When the value of money is on the vertical axis, an increase in the price level shifts
money demand to the right.
a. True
b. False
Higher inflation
a. causes firms to change prices less frequently and makes relative prices less variable.
b. causes firms to change prices less frequently and makes relative prices more variable.
c. causes firms to change prices more frequently and makes relative prices less variable.
d. causes firms to change prices more frequently and makes relative prices more
variable.
Other things the same, which of the following could be a consequence of an
appreciation of the U.S. real exchange rate?
a. John, a French citizen, decides that Iowa pork is now relatively less expensive and
orders more for his restaurant.
b. Nick, a U.S. citizen, decides that the trip to Nepal he’s been thinking about is now
affordable.
c. Roberta, a U.S. citizen, decides to import fewer windshield wipers for her auto parts
company.
d. All of the above are correct.
In the United States, the overall level of prices more than doubled during the
a. 1950s.
b. 1960s.
c. 1970s.
d. 1980s.
If he devotes all of his available resources to cantaloupe production, a farmer can
produce 120 cantaloupes. If he sacrifices 5 watermelons for each cantaloupe that he
produces, it follows that
a. if he devotes all of his available resources to watermelon production, then he can
produce 80 watermelons.
b. he cannot have a comparative advantage over other farmers in producing
cantaloupes.
c. his opportunity cost of one watermelon is 2/3 of a cantaloupe.
d. his production possibilities frontier is bowed-out.
Which of the following policies would Keynes’s followers support when an increase in
business optimism shifts the aggregate demand curve away from long-run equilibrium?
a. increase taxes
b. increase government expenditures
c. increase the money supply
d. All of the above are correct.
Only paid workers are included in the Bureau of Labor Statistics’ “employed” category.
a. True
b. False
Economists acting as scientists make positive statements, while economists acting as
policy advisers make normative statements.
a. True
b. False
While GDP includes tangible goods such as books and bug spray, it excludes intangible
services such as the services provided by teachers and exterminators.
a. True
b. False
Means-tested college aid, base college aid primarily on
a. a student’s abilities, and create an incentive to save.
b. a student’s abilities but create a disincentive to save.
c. the current interest rate and are an incentive to save.
d. the current interest rate and are a disincentive to save.
For purposes of calculating the CPI, the housing category of consumer spending
includes the cost of
a. shelter.
b. fuel and other utilities.
c. household furnishings and operation.
d. All of the above are correct.
If the number of workers in an economy doubled, all other inputs stayed the same, and
there were constant returns to scale, productivity would
a. fall to less than one-half of its former value.
b. fall, but it would still be greater than one-half of its former value.
c. stay the same.
d. rise but less than double.
Last year a country had 800 workers who worked an average of 8 hours and produced
12,800 units. This year the same country had 1000 workers who worked an average of 8
hours and produced 14,000 units. This country’s productivity was
a. higher this year than last year. A possible source of this change in productivity is a
change in the size of the capital stock.
b. higher this year than last year. A change in the size of the capital stock does not affect
productivity.
c. lower this year than last year. A possible source of this change in productivity is a
change in the size of the capital stock.
d. lower this year than last year. A change in the size of the capital stock does not affect
productivity.
When we say that economic fluctuations are “irregular and unpredictable,” we mean
that
a. the relationship between output and unemployment is erratic and difficult to
characterize.
b. when one macroeconomic variable that measures income or spending is falling, other
macroeconomic variables that measure income or spending are likely to be rising.
c. recessions do not occur at regular intervals.
d. All of the above are correct.
The deviation of unemployment from its natural rate is called
a. the economic rate of unemployment.
b. cyclical unemployment.
c. frictional unemployment.
d. structural unemployment.
Stagflation results from continued decreases in aggregate demand.
a. True
b. False
Although trade policies do not affect a country’s overall trade balance, they do affect
specific firms and industries.
a. True
b. False
Phillip is a mortgage broker, who is paid by commission. When interest rates decline,
he does a lot of business and earns a lot of money, as more people buy houses or
refinance their mortgages. But when interest rates rise, business falls substantially. To
diversify, Phillip should choose investments that
a. provide a higher return than the market average.
b. provide a lower return than the market average.
c. pay higher returns when interest rates rise and lower returns when interest rates fall.
d. pay lower returns when interest rates rise and higher returns when interest rates fall.
Consider two countries: Eastland and Westland. Eastland’s longrun Phillips curve sits
further to the right than does Westland’s longrun Phillips curve. Eastland and Westland
are identical in all other ways. In particular, they have the same money supply growth
rates. In the long run, compared to Westland, which of the following will we observe in
Eastland?
a. higher unemployment and higher inflation.
b. higher unemployment and the same rate of inflation.
c. lower unemployment and higher inflation.
d. None of the above is correct.
Figure 4-13
RefertoFigure4-13.If Producer A and Producer B are the only producers in the market,
then the market quantity supplied when the price is $4 is
a. 4 units.
b. 8 units.
c. 12 units.
d. 16 units.
From the end of 2005 to the end of 2006, the United States ran a deficit of about $309
billion. The debt at the start of this period was about $4,592 billion. Which of the
following combinations of inflation and real GDP growth would have allowed the
government to run this deficit while keeping the ratio of real GDP to the debt about the
same?
a. about 3% inflation and about 2.2% real GDP growth
b. about 3% inflation and about 3.2% real GDP growth
c. about 3.4% inflation and about 3.3% real GDP growth
d. about 3.4% inflation and about 4% real GDP growth
If a country raises its budget deficit, then in the market for foreign-currency exchange
a. supply shifts left.
b. supply shifts right.
c. demand shifts left.
d. supply shifts right.
Which of the following is nota correct statement about the growth of real GDP in the
U.S. economy?
a. Real GDP in 2009 was almost four times its 1965 level.
b. Growth was steady between 1965 and 2009.
c. Continued growth in real GDP enables the typical American to enjoy greater
economic prosperity than his or her parents and grandparents did.
d. The output of goods and services produced grew on average about 3 percent per year
between 1965 and 2009.
Which of the programs below would nottransfer wealth from young to old generations?
a. Taxes are reduced as a result of cutting expenditures on education.
b. Taxes are raised to improve government infrastructure such as roads and bridges.
c. Taxes are raised to provide more generous Social Security benefits.
d. Taxes are raised to provide more generous Medicare benefits.
Figure 3-6
Refer to Figure3-6. If the production possibilities frontiers shown are each for one day
of work, then which of the following combinations of pies and tarts could Maxine and
Daisy together notmake in a given day?
a. 2 pies and 25 tarts
b. 10 pies and 22 tarts
c. 12 pies and 15 tarts
d. 15 pies and 16 tarts
Table 3-28
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim
can switch between setting up and testing computers at a constant rate. The following
table applies.
RefertoTable3-28.Barb has an absolute advantage in
a. both setting up and testing computers and a comparative advantage in setting up
computers.
b. both setting up and testing computers and a comparative advantage in testing
computers.
c. neither setting up nor testing computers and a comparative advantage in setting up
computers.
d. neither setting up nor testing computers and a comparative advantage in testing
computers.
You put money into an account and earn a real interest rate of 4 percent. Inflation is 2
percent, and your marginal tax rate is 25 percent. What is your after-tax real rate of
interest?
a. 1.5 percent.
b. 2.5 percent.
c. 5.0 percent.
d. 4.5 percent.
Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A
year later, Bob withdraws his $105. If deflation was 7 percent during the year the
money was deposited, then Bob’s purchasing power has increased by 12 percent.
a. True
b. False
Most spells of unemployment are long, and most unemployment observed at any given
time is long-term.
a. True
b. False
Figure 2-4
RefertoFigure2-4. This economy cannotproduce at which point(s)?
a. Q
b. Q, S
c. Q, S, T
d. S
If a major union goes on strike, then the country would be operating inside its
production possibilities frontier.
a. True
b. False
A rationale for government involvement in a market economy is
a. markets sometimes fail to produce a fair distribution of economic well-being.
b. markets sometimes fail to produce an efficient allocation of resources.
c. property rights have to be enforced.
d. All of the above are correct.
RefertoFigure2-10,Panel(a).Production at point Y is
a. impossible and inefficient.
b. impossible but efficient.
c. possible but inefficient.
d. possible and efficient.
Table 28-3
2009 Labor Data for Baltivia
RefetoTable28-3.What was Baltivia’s unemployment rate in 2009?
a. 8.0%
b. 12.7%
c. 15.9%
d. 22.1%