When the price level falls, people want to
a. hold more money and the quantity of aggregate goods and services demanded
increases.
b. hold more money and the quantity of aggregate goods and services demanded
decreases.
c. hold less money and the quantity of aggregate goods and services demanded
increases.
d. hold less money and the quantity of aggregate goods and services demanded
decreases.
GDP excludes the value of intermediate goods because their value is included in the
value of final goods.
a. True
b. False
Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer’s
basket consists of 2 pillows and 15 hotdogs.
RefertoTable24-6. The cost of the basket
a. increased from 2009 to 2010 and increased from 2010 to 2011.
b. increased from 2009 to 2010 and decreased from 2010 to 2011.
c. decreased from 2009 to 2010 and increased from 2010 to 2011.
d. decreased from 2009 to 2010 and decreased from 2010 to 2011.
Below are pairs of GDP growth rates and unemployment rates. Economists would be
shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and
unemployment rates is realistic?
a. 5 percent, 1 percent
b. 3 percent, 5 percent
c. -1 percent, 3 percent
d. -2 percent, 4 percent
In the market for foreign-currency exchange, capital flight shifts
a. the demand curve right.
b. the demand curve left.
c. the supply curve right.
d. the supply curve left.
The value of money rises as the price level
a. rises, because the number of dollars needed to buy a representative basket of goods
rises.
b. rises, because the number of dollars needed to buy a representative basket of goods
falls.
c. falls, because the number of dollars needed to buy a representative basket of goods
rises.
d. falls, because the number of dollars needed to buy a representative basket of goods
falls.
The variables on the vertical and horizontal axes of the aggregate demand and supply
graph are
a. the price level and real output.
b. real output and employment.
c. employment and the inflation rate.
d. the value of money and the price level.
There is a clear consensus among economists that unions are
a. good for the economy because they result in higher wages for most workers.
b. good for the economy because they are a necessary antidote to the market power of
employers.
c. bad for the economy because they are cartels and therefore detrimental to an efficient
allocation of resources.
d. None of the above is correct; there is no clear consensus among economists about
whether unions are good or bad for the economy.
Which of the following would cause prices to rise and real GDP to fall in the short run?
a. an increase in the expected price level.
b. an increase in the capital stock.
c. an increase in the money supply.
d. an increase in taxes.
International trade may make some individuals in a nation better off, while other
individuals are made worse off.
a. True
b. False
Other things the same, if the long-run aggregate supply curve shifts left, prices
a. and output both increase.
b. and output both decrease.
c. increase and output decreases.
d. decrease and output increases.
U.S. net exports fall due to recessions in foreign countries.
A. According to the aggregate demand and supply model, what happens to the price
level and output in the short run?
B. According to the short-run Phillips curve what happens to inflation and
unemployment in the short run?
C. If the Fed wanted to reverse the effects of this shock on output, what should it do?
Cyclical unemployment is caused by
a. frictional and structural unemployment
b. frictional but not structural unemployment
c. structural but not frictional unemployment
d. neither frictional nor structural unemployment
When a production possibilities frontier is bowed outward, the opportunity cost of
producing an additional unit of a good
a. increases as more of the good is produced.
b. decreases as more of the good is produced.
c. does not change as more of the good is produced.
d. may increase, decrease, or not change as more of the good is produced.
In a closed economy, what does (T– G) represent?
a. national saving
b. investment
c. private saving
d. public saving
From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the
inflation rate for education between 2009 and 2010?
a. 0.9%
b. 9.0%
c. 2.5%
d. 90%
When a country suffers from capital flight, the exchange rate
a. depreciates, because demand in the market for foreign-currency exchange shifts left.
b. depreciates, because supply in the market for foreign-currency exchange shifts right.
c. appreciates, because demand in the market for foreign-currency exchange shifts right.
d. appreciates, because supply in the market for foreign-currency exchange shifts left.
Table 4-10
The following table shows the number of cases of water each seller is willing to sell at
the prices listed.
RefertoTable4-10. If the four suppliers listed are the only suppliers in this market and
the market quantity demanded is 500 cases when the price is $5.00, which of the
following statements is correct?
a. The market is in equilibrium at a price of $5.00.
b. There is a surplus of 100 cases at a price of $5.00.
c. There is a shortage of 100 cases at a price of $5.00.
d. There is a shortage of 50 cases at a price of $5.00.
Manufacturers of Weightbegone are concerned that genetic advances in weight control
might reduce the demand for their diet snacks. This is an example of
a. firmspecific risk, which will likely raise shareholders’ demand for higher return.
b. firmspecific risk, which will likely not likely raise shareholders’ demand for higher
return.
c. market risk, which will likely raise shareholders’ demand for higher return.
d. market risk, which will likely not raise shareholders’ demand for higher return.
Figure 32-2
RefertoFigure32-2.What are the equilibrium values of the real exchange rate and net
exports?
a. 1, 300
b. .8, 400
c. .6, 500
d. None of the above are correct.
Keynes used the term “animal spirits” to refer to
a. policy makers harming the economy in the pursuit of self interest.
b. arbitrary changes in attitudes of household and firms.
c. mean-spirited economists who believed in the classical dichotomy.
d. firms’ relentless efforts to maximize profits.
In the economy of Talikastan in 2015, consumption was $800, GDP was $2000,
government purchases were $400, and investment was $600. What were Talikastan’s net
exports in 2015?
a. -$200
b. $200
c. $1800
d. Net exports cannot be calculated from the information given.
An increase in supply will cause a decrease in price, which will cause an increase in
demand.
a. True
b. False
For an economy as a whole,
a. wages must equal profit.
b. consumption must equal income.
c. income must equal expenditure.
d. consumption must equal saving.
The laws that created the Fed give it only vague recommendations about what goals it
should pursue, and they do not tell the Fed how to pursue whatever goals it might
choose.
a. True
b. False
During a hyperinflation the real domestic value of a country’s currency
a. falls and its nominal exchange rate depreciates.
b. falls and its nominal exchange rate appreciates.
c. rises and its nominal exchange rate depreciates.
d. rises and its nominal exchange rate appreciates.
With the resources it has, an economy can produce at any point on or outside the
production possibilities frontier, but it cannot produce at points inside the frontier.
a. True
b. False
A reduction in the tax rate on interest income
a. would necessarily raise national saving.
b. would primarily benefit the wealthy.
c. both a and b are correct.
d. None of the above are correct.
The designation “natural” implies that the natural rate of unemployment
a. is desirable.
b. is constant over time.
c. is impervious to economic policy.
d. does not go away on its own even in the long run.
Figure 3-5
Refer to Figure3-5. If Hosne must work 0.5 hour to make each purse, then her
production possibilities frontier is based on how many hours of work?
a. 2 hours
b. 5 hours
c. 20 hours
d. 50 hours
A U.S. grocery chain buys bananas from Honduras and pays for them with U.S. dollars.
a. The purchase of the bananas increases U.S. net exports and the payment with dollars
increases U.S. net capital outflow.
b. The purchase of bananas increases U.S. net exports and the payment with dollars
decreases U.S. net capital outflow.
c. The purchase of bananas decreases U.S. net exports and the payment with dollars
increases U.S. net capital outflow.
d. The purchase of bananas decreases U.S. net exports and the payment with dollars
decreases U.S. net capital outflow.
Figure 2-2
RefertoFigure2-2. Boxes A and B of this circular-flow diagram represent
a. firms and households.
b. households and government.
c. the markets for goods and services and the markets for financial assets.
d. the markets for goods and the markets for services.
Which of the following events would unambiguously cause an increase in the
equilibrium price of cotton shirts?
a. an increase in the price of wool shirts and a decrease in the price of raw cotton
b. a decrease in the price of wool shirts and a decrease in the price of raw cotton
c. an increase in the price of wool shirts and an increase in the price of raw cotton
d. a decrease in the price of wool shirts and an increase in the price of raw cotton
In a market economy, economic activity is guided by
a. the government.
b. central planners.
c. large businesses.
d. prices and self-interest.
A leftward shift of a supply curve is called a(n)
a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.