The real balance effect is the change in
a. purchasing power that results from a change in income.
b. the amount of money one has that results from a change in income.
c. purchasing power that results from a change in the price level.
d. the amount of money one has that results from a change in the price level.
e. none of the above
The equation of exchange
a. is a theory of the macroeconomy as it stands.
b. can be turned into a theory of the macroeconomy if certain assumptions are made
about some of its variables.
c. cannot be turned into a theory of the macroeconomy.
d. is a theory in microeconomics as it stands.
What is the most prominent rationing device you will likely find at your campus
bookstore?
a. dollar price
b. brute force
c. anti-theft tags on the high-priced items
d. none of the above
Suppose the money market is in the liquidity trap and the Fed increases the supply of
money. Individuals would rather hold __________ than __________ because they
expect that bond prices can go no __________.
a. bonds; money; higher
b. bonds; money; lower
c. money; bonds; higher
d. money; bonds; lower
Constitutional economists
a. assert that within a given set of institutions, constraints, laws and rules, outcomes
might be the same no matter who is elected to office.
b. study the type of constraints that individuals might seek to place upon themselves in
order to achieve some objective that doesn’t seem achievable in a non-constrainable
environment.
c. assert that better outcomes arise from changing the political party in power at any
given point in time than from changing institutions and constraints.
d. b and c
e. a and b
Keisha can produce the following combinations of X and Y: 100X and 20Y, 50X and
30Y, or 0X and 40Y. The opportunity cost of one unit of Y for Keisha is
a. 5 units of X.
b. 0.2 units of X.
c. 3 units of X.
d. 1/2 unit of X.
e. none of the above
Political candidates tend to identify themselves as being “middle-of-the-roaders”, while
they tend to label their opponents as a member of the political fringe.
a. True
b. False
University A sets tuition at the equilibrium level based on price and then imposes
entrance requirements in the form of minimum high school GPA and SAT scores.
Enrollment at this school will likely be
a. at the equilibrium level.
b. below the equilibrium level because of the use of non-price rationing devices.
c. above the equilibrium level because of the combination of price and the use of
non-price rationing devices.
d. none of the above
Which of the following statements is true?
a. Keynes believed wages are inflexible downward but prices (of goods and services)
are flexible.
b. Keynes believed an economy could get stuck in a recessionary gap.
c. Keynes originated the idea of efficiency wages.
d. Keynes believed the economy is self-regulating.
e. b and c
Exhibit 2-6
Which graph best depicts the consequence of a large-scale natural disaster?
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
Suppose that for Alicia the marginal benefit (MB) of producing is $75 and that the
marginal cost (MC) of producing is $5.Suppose also that her marginal benefit of
stealing is $85 and the marginal cost of stealing is $5.Is Alicia currently maximizing
utility in terms of producing and stealing?If not, should she produce more and steal less,
or produce less and steal more to move toward utility maximization?
a. Yes, Alicia is maximizing utility.
b. No, Alicia is not maximizing utility.Since the MB/MC ratio for producing is less than
the MB/MC ratio for stealing, Alicia should produce more and steal less.
c. No,Alicia is not maximizing utility.Since the MB/MC ratio for producing is greater
than the MB/MC ratio for stealing, Alicia should produce more and steal less.
d. No,Alicia is not maximizing utility.Since the MB/MC ratio for producing is less than
the MB/MC ratio for stealing, Alicia should steal more and produce less.
A rise in wage rates
a. causes the AD curve to shift leftward.
b. causes the short-run aggregate supply (SRAS) curve to shift rightward.
c. does not affect the present position of the SRAS curve.
d. causes the AD curve to shift rightward.
e. causes the SRAS curve to shift leftward.
The efficiency wage model is an explanation of wage __________ and thus a support
for the ____________________ view.
a. flexibility; Keynesian
b. flexibility; classical
c. inflexibility; Keynesian
d. inflexibility; classical
Which of the following statements is true?
a. A decrease in wage rates will shift the SRAS curve to the left.
b. An adverse supply shock will shift the SRAS curve to the left.
c. A fall in the prices of nonlabor inputs will shift the SRAS curve to the left.
d. An increase in labor productivity will shift the SRAS curve to the left.
e. c and d
If the Fed purchases government securities from commercial banks, the reserves of the
banking system will immediately
a. increase by the amount of the purchase.
b. increase by more than the amount of the purchase.
c. remain constant.
d. decrease by the amount of the purchase.
e. decrease by more than the amount of the purchase.
According to the Keynesian transmission mechanism, if the Fed conducts an open
market purchase of government securities, it may cause which of the following in the
investment goods market?
a. a rightward shift in the investment demand curve
b. a leftward shift in the investment demand curve
c. a movement down and along a given investment demand curve
d. a movement up and along a given investment demand curve
On a TE-TP diagram consider a level of Real GDP at which the vertical distance to the
TE line is less than the vertical distance to the 45-degree line. This level of Real GDP is
__________ its equilibrium level, with __________.
a. above; TE > TP
b. above; TE < TP
c. below; TE > TP
d. below; TE < TP