Unemployment data are collected
a. from unemployment insurance claims.
b. through a regular survey of about 60,000 households.
c. through a regular survey of about 200,000 firms.
d. using all of the above.
In the long run a reduction in the money supply growth rate affects
a. the inflation rate and the natural rate of unemployment.
b. the inflation rate but not the natural rate of unemployment.
c. neither the inflation rate nor the natural rate of unemployment.
d. the natural rate of unemployment, but not the inflation rate.
The Fed’s primary tool to change the money supply is
a. changing the interest rate on reserves.
b. changing the reserve requirement.
c. conducting open market operations.
d. redeeming Federal Reserve notes.
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.
For the Bureau of Labor Statistics to place someone in the “unemployed” category, that
person must
a. have worked no more than 10 hours during the past week..
b. have tried to find employment during the previous year.
c. not have been laid off.
d. None of the above is correct.
Monetary policy affects the economy with a long lag, in part because
a. proposals to change monetary policy must go through both the House and Senate
before being sent to the president.
b. monetary policy works through changes in interest rates, and the Fed does not have
the ability to change interest rates quickly.
c. changes in interest rates primarily influence consumption spending, and households
make consumption plans far in advance.
d. changes in interest rates primarily influence investment spending, and firms make
investment plans far in advance.
What is the present value of a payment of $100 to be made one year from today?
a. $100*(1 + r)
b. $100/(1 + r)
c. $100 – $100 r
d. $100 – (1 + r)/$100
When you were 10 years old, your grandparents put $500 into an account for you
paying 7 percent interest. Now that you are 18 years old, your grandparents tell you that
you can take the money out of the account. What is the balance to the nearest cent?
a. $1,200.00
b. $1,111.77
c. $983.58
d. $859.09
Figure 3-8
Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
Refer to Figure 3-8. If Chile and Colombia each divides its time equally between
making coffee and making soybeans, then total production is
a. 12 pounds of coffee and 12 pounds of soybeans.
b. 14 pounds of coffee and 9 pounds of soybeans.
c. 16 pounds of coffee and 6 pounds of soybeans.
d. 28 pounds of coffee and 18 pounds of soybeans.
When a tax is placed on the buyers of a product, a result is that buyers effectively pay
a. less than before the tax, and sellers effectively receive less than before the tax.
b. less than before the tax, and sellers effectively receive more than before the tax.
c. more than before the tax, and sellers effectively receive less than before the tax.
d. more than before the tax, and sellers effectively receive more than before the tax.
The production possibilities frontier illustrates
a. the combinations of output that an economy should produce.
b. the combinations of output that an economy should consume.
c. the combinations of output that an economy can produce.
d. All of the above are correct.
An increase in the U.S. interest rate
a. raises the opportunity cost of holding dollars.
b. induces households to increase consumption.
c. shifts money demand to the right.
d. leads to a depreciation of the U.S. dollar.
A barber shop produces 96 haircuts a day. Each barber in the shop works 8 hours per
day and produces the same number of haircuts per hour. If the shop’s productivity is 2
haircuts per hour of labor, then how many barbers does the shop employ?
a. 2
b. 3
c. 4
d. 6
Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Hours Needed
To Make 1 Amount Produced
in 40 Hours
Refer to Table 3-6. The opportunity cost of 1 mixer for Maya is
a. 0.625 toasters.
b. 5 hours of labor.
c. 1.6 toasters.
d. 20 hours of labor.
The country of Lessidinia has a tax system identical to that of the United States.
Suppose someone in Lessidinia bought a parcel of land for 20,000 foci (the local
currency) in 1960 when the price index equaled 100. In 2002, the person sold the land
for 100,000 foci, and the price index equaled 600. The tax rate on nominal gains was 20
percent. Compute the taxes on the nominal gain and the change in the real value of the
land in terms of 2002 prices to find the after-tax real rate of capital gain.
a. -60 percent
b. -30 percent
c. 30 percent
d. 60 percent
Which of the following contains a list only of things that increase when the budget
deficit of the U.S. increases?
a. U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment
b. U.S. imports, U.S. interest rates, the real exchange rate of the dollar
c. U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment
d. the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports
Figure 8-1
Refer to Figure 8-1. Suppose the government imposes a tax of P’ – P”’. The producer
surplus after the tax is measured by the area
a. M.
b. L+M+N+Y+B.
c. L+M+Y.
d. J.
If the inflation rate is zero, then
a. both the nominal interest rate and the real interest rate can fall below zero.
b. the nominal interest rate can fall below zero, but the real interest rate cannot fall
below zero.
c. the real interest rate can fall below zero, but the nominal interest rate cannot fall
below zero.
d. neither the nominal interest rate nor the real interest rate can fall below zero.
You receive a paycheck from your employer, and your pay stub indicates that $300 was
deducted to pay the FICA (Social Security/Medicare) tax. Which of the following
statements is correct?
a. The $300 that you paid is not necessarily the true burden of the tax that falls on you,
the employee.
b. Your employer is required by law to pay $300 to match the $300 deducted from your
check.
c. This type of tax is an example of a payroll tax.
d. All of the above are correct.
Compared to stocks, bonds offer the holder
a. lower risk and lower potential return.
b. lower risk and higher potential return.
c. higher risk and lower potential return.
d. higher risk and higher potential return.
Crowding out occurs when investment declines because
a. a budget deficit makes interest rates rise.
b. a budget deficit makes interest rates fall.
c. a budget surplus makes interest rates rise.
d. a budget surplus makes interest rates fall.
The U.S. Congress first instituted a minimum wage in
a. 1776.
b. 1812.
c. 1938.
d. 1975.
According to classical macroeconomic theory,
a. the price level is sticky in the short run and it plays only a minor role in the short-run
adjustment process.
b. for any given level of output, the interest rate adjusts to balance the supply of, and
demand for, money.
c. output is determined by the supplies of capital and labor and the available production
technology.
d. All of the above are correct.
The price of a stock will rise if
a. the managers of a stock exchange decide the price should be higher.
b. the demand for the stock rises.
c. the supply of the stock rises.
d. None of the above are correct.
Table 2-1
The following table contains some production possibilities for an economy for a given
month.
Refer to Table 2-1. If the production possibilities frontier is bowed outward, then “?”
could be
a. 100.
b. 150.
c. 200.
d. 250.
A tax on a good
a. gives buyers an incentive to buy more of the good than they otherwise would buy.
b. gives sellers an incentive to produce less of the good than they otherwise would
produce.
c. creates a benefit to the government, the size of which exceeds the loss in surplus to
buyers and sellers.
d. All of the above are correct.
Which of the following are U.S. taxpayers allowed to adjust for inflation for the
purpose of income taxes?
a. both interest income and capital gains.
b. interest income but not capital gains.
c. capital gains but not interest income.
d. neither interest income nor capital gains.
Menu costs refers to
a. resources used by people to maintain lower money holdings when inflation is high.
b. resources used to price shop during times of high inflation.
c. the distortion in incentives created by inflation when taxes do not adjust for inflation.
d. the cost of more frequent price changes induced by higher inflation.
Which of the following is not a commonly-advanced argument for trade restrictions?
a. the jobs argument
b. the national-security argument
c. the infant-industry argument
d. the efficiency argument
If the supply of loanable funds shifts left, then
a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
The actions of buyers and sellers naturally move markets toward equilibrium.
The long-run Phillips curve is consistent with monetary neutrality implied by the
classical dichotomy.
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.
When a firm wants to borrow directly from the public to finance the purchase of new
equipment, it does so by selling shares of stock.
Most spells of unemployment are long, and most unemployment observed at any given
time is long-term.
If the quantity of money demanded is greater than the quantity supplied, then the value
of money rises.
If baked potatoes and sour cream are complements, then an increase in the price of sour
cream decreases the demand for baked potatoes.
If the Fed decreases reserve requirements, the money supply will increase.
To be binding, a price ceiling must be set above the equilibrium price.
The opportunity cost of something is what you give up to get it.
A tax raises the price received by sellers and lowers the price paid by buyers.
In response to a decrease in output, the economy would revert to its original level of
prices and output whether the decrease in output was caused by a decrease in aggregate
demand or a decrease in short-run aggregate supply.
The unemployed who quit their jobs, were fired for cause, or just entered the labor force
are eligible for unemployment insurance.
One common example of a price ceiling is rent control.
An economic model can accurately explain how the economy is organized because it is
designed to include, to the extent possible, all features of the real world.
A tax of $1 on buyers always decreases the equilibrium price by $1.
Tariffs cause deadweight loss because they move the price of an imported product
closer to the equilibrium without trade, thus reducing the gains from trade.
When quantity demanded exceeds quantity supplied at the current market price, the
market has a shortage, and market price will likely rise in the future to eliminate the
shortage.