A decrease in quantity demanded
a. results in a movement downward and to the right along a demand curve.
b. results in a movement upward and to the left along a demand curve.
c. shifts the demand curve to the left.
d. shifts the demand curve to the right.
Sectoral shifts in demand for output
a. create structural unemployment.
b. immediately reduce unemployment.
c. increase unemployment due to job search.
d. do not affect demand for labor.
Figure 34-9
RefertoFigure34-9.Suppose the economy is currently at point A. To restore full
employment, the appropriate fiscal response
a. requires the central bank to purchase government bonds, which will increase the
money supply.
b. is a reduction in government purchases.
c. is a reduction in taxes.
d. requires the central bank to sell government bonds, which will reduce the money
supply.
As the price level decreases, the value of money
a. increases, so people must hold less money to purchase goods and services.
b. increases, so people must hold more money to purchase goods and services.
c. decreases, so people must hold more money to purchase goods and services.
d. decreases, so people must hold less money to purchase goods and services.
Other things the same, when the interest rate rises, the present value of future revenues
from investment projects
a. rises, so investment spending rises.
b. falls, so investment spending rises.
c. rises, so investment spending falls.
d. falls, so investment spending falls.
Which of the following items plays a role in determining productivity?
a. physical capital
b. natural resources
c. technological knowledge
d. All of the above are correct.
Will is risk averse and has $1,000 with which to make a financial investment. He has
three options. Option A is a risk-free government bond that pays 5 percent interest each
year for two years. Option B is a low-risk stock that analysts expect to be worth about
$1,102.50 in two years. Option C is a high-risk stock that is expected to be worth about
$1,200 in four years. Will should choose
a. option A.
b. option B.
c. option C.
d. either option A or option B because Will is indifferent between those two options and
they are superior to option C.
Government policies can change the costs and benefits that people face. Those policies
have the potential to
a. alter people’s behavior.
b. alter people’s decisions at the margin.
c. produce results that policymakers did not intend.
d. All of the above are correct.
Gross domestic product measures
a. income and expenditures.
b. income but not expenditures.
c. expenditures but not income.
d. neither income nor expenditures.
If the reserve ratio is 6 percent, then $9,000 of additional reserves can create up to
a. $159,000 of new money.
b. $54,000 of new money.
c. $150,000 of new money.
d. $141,000 of new money.
Which of the following is true concerning interest rates on bonds?
a. The tax treatment of interest earned on municipals bonds makes the interest rate on
them higher than otherwise. High default risk makes the interest rate on a bond higher
than otherwise.
b. The tax treatment of interest earned on municipals bonds makes the interest rate on
them higher than otherwise. High default risk makes the interest rate on a bond lower
than otherwise.
c. The tax treatment of interest earned on municipals bonds makes the interest rate on
them lower than otherwise. High default risk makes the interest rate on a bond higher
than otherwise.
d. The tax treatment of interest earned on municipals bonds makes the interest rate on
them lower than otherwise. High default risk makes the interest rate on a bond lower
than otherwise.
When quantity demanded increases at every possible price, the demand curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the demand curve to a new point on the
same curve.
d. not shifted; rather, the demand curve has become steeper.
Velocity is computed as the
a. price level times real GDP divided by the money supply.
b. price level times the money supply divided by real GDP.
c. real GDP times the money supply divided by the price level.
d. real GDP times the money supply divided by the rate at which money changes hands.
Supply-side economists believe that changes in government purchases affect
a. only aggregate demand.
b. only aggregate supply.
c. both aggregate demand and aggregate supply.
d. neither aggregate demand nor aggregate supply.
About what percentage of jobs are destroyed every year, and about what percentage of
workers leave their jobs in a typical month?
a. 1% and 5%
b. 5% and 1%
c. 3% and 10%
d. 10% and 3%
Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer’s basket
consists of 4 pounds of pork and 3 bushels of corn.
RefertoTable24-3. The cost of the basket in 2012 was
a. $108.
b. $116.
c. $112.
d. $224.
Which of the following represents a transfer payment?
a. You transfer $1,000 from your bank account to a mutual fund.
b. The government sends your grandfather his Social Security check.
c. You make a payment to get legal documents showing you purchased a previously
owned home.
d. Your employer automatically transfers $100 each month from your wages to a
non-taxable medical spending account.
The multiplier is computed as MPC/ (1 – MPC).
a. True
b. False
When the price of Italian wine rises, this change is reflected in the U.S. CPI but not in
the U.S. GDP deflator.
a. True
b. False
Suppose that florists and landscape workers are not unionized. If florists unionize, then
the wages of
a. florists will rise, and the wages of landscape workers will fall.
b. florists will fall, and the wages of landscape workers will rise.
c. both florists and landscape workers will rise.
d. both florists and landscape workers will fall.
Ellen deposited $500 into an account and two years later she had $561.80 in the
account. What interest rate was paid on Ellen’s deposit?
a. 4.88 percent
b. 6.00 percent
c. 12.36 percent
d. None of the above is correct.
Which of the following is correct concerning a risk-averse person?
a. She would not play games where the probability of winning and losing a dollar are
the same.
b. She might not buy health insurance if she thinks her risks are low.
c. Her marginal utility of wealth decreases as her income increases.
d. All of the above are correct.
The “natural” rate of unemployment is the unemployment rate toward which the
economy gravitates in the
a. short run, and the natural rate is the socially optimal rate of unemployment.
b. long run, and the natural rate is the socially optimal rate of unemployment.
c. short run, and the natural rate is not necessarily the socially optimal rate of
unemployment.
d. long run, and the natural rate is not necessarily the socially optimal rate of
unemployment.
Supply-side economists focus more than other economists on
a. how fiscal policy affects consumption.
b. the multiplier effect of fiscal policy.
c. how fiscal policy affects aggregate supply.
d. the money supply.
The recessions associated with the business cycle come at regular intervals.
a. True
b. False
Which of the following would most likely serve as an example of a monopoly?
a. a restaurant in a large city
b. a dry cleaners in a large city
c. a local gas station
d. a local electrical company
Shawn determines that if Lexall Corporation has high revenues, then Waters
Corporation will have low revenues, and that if Lexall Corporation has low revenues,
then Waters Corporation will have high revenues. Shawn buys stock in both
corporations.
a. He has reduced firm-specific risk but not market risk.
b. He has reduced market risk, but not firm-specific risk.
c. He had reduce both firm-specific risk and market risk.
d. He has reduced neither firm-specific risk nor market risk.
If businesses and consumers become pessimistic, the Federal Reserve can attempt to
reduce the impact on the price level and real GDP by
a. increasing the money supply, which raises interest rates.
b. increasing the money supply, which lowers interest rates.
c. decreasing the money supply, which raises interest rates.
d. decreasing the money supply, which lowers interest rates.
If a line passes through the points (20,5) and (10,10), then the slope of the line is 1/2.
a. True
b. False
The market for ice cream is a
a. monopolistic market.
b. highly competitive market.
c. highly organized market.
d. Both b and c are correct.
The downward slope of the aggregate demand curve is based on logic that as the price
level rises, consumption, investment, and net exports all fall.
a. True
b. False
Other things the same, the real exchange rate between American and French goods
would be lower if
a. prices of French goods were higher, or the number of euros a dollar purchased was
higher.
b. prices of French goods were higher, or the number of euros a dollar purchased was
lower.
c. prices of French goods were lower, or the number of euros a dollar purchased was
higher.
d. prices of French goods were lower, or the number of euros a dollar purchased was
lower.
When a minimum-wage law forces the wage to remain above the level that balances
supply and demand, the quantity of labor supplied is higher and the quantity demanded
of labor is lower than at the equilibrium wage.
a. True
b. False
Credit risk refers to the probability that the issuer of a bond will fail to pay some or all
of the interest or principal.
a. True
b. False
Which of the following statements is true?
a. The quantity of natural resources per worker can influence productivity.
b. Technological knowledge and human capital are closely related.
c. Over long periods of time, the prices of most natural resources are stable or falling,
relative to other prices.
d. All of the above are correct.