Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays
$60,000. Which pair of CPIs would ensure that the two salaries have the same
purchasing power?
a. 80 in Kansas City and 100 in Dallas
b. 125 in Kansas City and 150 in Dallas
c. 100 in Kansas City and 124.5 in Dallas
d. 100 in Kansas City and 140 in Dallas
When consumer spending is broken down into the major categories of goods and
services, the largest single category is spending on transportation.
a. True
b. False
In 2012, GDP per person in the United States was almost
a. $14,000.
b. $36,000.
c. $46,000
d. $50,000
The government of a country, which has adopted American GDP accounting
conventions, reported that seasonally adjusted GDP in quarter 3 was $48 billion at an
annual rate. This means that the seasonally-adjusted market value of all final goods and
services produced within this country in quarter 3 was
a. $4 billion.
b. $12 billion.
c. $16 billion.
d. $48 billion.
Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase
U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens
to U.S. net exports and U.S. net capital outflows?
a. both U.S. net exports and U.S. net capital outflow rise
b. both U.S. net exports and U.S. net capital outflow fall
c. U.S. net exports rise and U.S. net capital outflow fall
d. U.S. net exports fall and U.S. net capital outflow rise
Which of the following is included in M2 but not in M1?
a. demand deposits
b. corporate bonds
c. large time deposits
d. money market mutual funds
According to Friedman and Phelps, policymakers face a tradeoff between inflation and
unemployment
a. only in the long run.
b. only in the short run.
c. in neither the long run nor short run.
d. in both the short run and long run.
Assume the following.
The MPC has a value of 0.8.
The relationship between the interest rate, , and investment, I, is given by the equation,
I = 20,000 ” ,
where is a positive constant.
Government purchases, G, are increased by $1,000.
In which of the following cases would there be no crowding out?
a. = 0
b. = 0.2
c. = 0.8
d. = 1
If a lobster in Maine costs $10 and that the same type of lobster in Massachusetts costs
$30, then people could make a profit by
a. buying lobsters in Maine and selling them in Massachusetts. This action would
increase the price of lobster in Massachusetts.
b. buying lobsters in Maine and selling them in Massachusetts. This action would
decrease the price of lobster in Massachusetts.
c. buying lobsters in Massachusetts and selling them in Maine. This action would
increase the price of lobster in Massachusetts.
d. buying lobsters in Massachusetts and selling them in Maine. This action would
decrease the price of lobster in Massachusetts.
Last year country A had a nominal GDP of $600 billion, a GDP deflator of 150 and a
population of 40 million.
Country B had a nominal GDP of $720 billion, a GDP deflator of 120 and a population
of 50 million. From these numbers which country is likely to have had the higher
standard of living?
a. Country A because it had the higher nominal GDP per person.
b. Country B because it had the higher nominal GDP per person.
c. Country A because it had the higher real GDP per person.
d. Country B because it had the higher real GDP per person.
The ordered pair that represents the origin on a graph is
a. (1, 1).
b. (0, 0).
c. (-1, -1).
d. (∞, ∞).
Two countries with the same saving rates must have the same growth rate of real GDP
per person.
a. True
b. False
If the GDP deflator in 2009 was 150 and the GDP deflator in 2010 was 175, then the
inflation rate in 2010 was 25%.
a. True
b. False
Just after World War II, the labor-force participation rate of women was
a. about 25 percent, and in 2012, it was about 50 percent.
b. about 33 percent, and in 2012, it was about 60 percent.
c. about 50 percent, and in 2012, it was about 70 percent.
d. about 60 percent, and in 2012, it was about 80 percent.
U.S. Financial Crisis
Suppose that foreigners had reduced confidence in U.S. financial institutions and
believed that privately issued U.S. bonds were more likely to be defaulted on.
RefertoU.S.FinancialCrisis.What would happen in the market for foreign-currency
exchange?
a. the supply of dollars would shift right and the exchange rate would rise.
b. the supply of dollars would shift right and the exchange rate would fall.
c. the supply of dollars would shift left and the exchange rate would rise.
d. None of the above is correct.
The costs of changing price tags and price listings are known as
a. inflation-induced tax distortions.
b. relative-price variability costs.
c. shoeleather costs.
d. menu costs.
Which of the following is a way to compute GDP?
a. add up the wages paid to all workers
b. add up the quantities of all final goods and services
c. add up the market values of all final goods and services
d. add up the difference between the market values of all final goods and services and
then subtract the costs of producing those goods and services
Macroeconomics is the study of
a. individual decision makers.
b. international trade.
c. economy-wide phenomena.
d. markets for large products.
The term loanablefundrefers to all income that is not used for consumption or
government expenditures.
a. True
b. False
The misperceptions theory of the short-run aggregate supply curve says that if the price
level is higher than people expected, then some firms believe that the relative price of
what they produce has
a. decreased, so they increase production.
b. decreased, so they decrease production.
c. increased, so they increase production.
d. increased, so they decrease production.
If the Fed reduces inflation 1 percentage point and this makes output fall 5 percentage
points and unemployment rises 2 percentage points for one year, the sacrifice ratio is
a. 1/5.
b. 2.
c. 5/2.
d. 5.
Last year real GDP per person in the imaginary nation of Olympus was 4,250. The year
before it was 4,100. By about what percentage did Olympian real GDP per person grow
during the period?
a. 1.6 percent
b. 2.5 percent
c. 3.7 percent
d. 6 percent
A market is a group of buyers and sellers of a particular good or service.
a. True
b. False
In a particular country in 1999, the average worker had to work 20 hours to produce 55
units of output. In that same country in 2009, the average worker needed to work 28
hours to produce 77 units of output. In that country, the productivity of the average
worker
a. increased by 2 percent between 1999 and 2009.
b. increased by 5 percent between 1999 and 2009.
c. remained unchanged between 1999 and 2009.
d. decreased by 3 percent between 1999 and 2009.
Two variables that have a positive correlation move in the same direction.
a. True
b. False
Suppose that the central bank must follow a rule that requires it to increase the money
supply when the price level falls and decrease the money supply when the price level
rises. If the economy starts from long-run equilibrium and aggregate demand shifts
right, the central bank must
a. decrease the money supply, which will move output back towards its long-run level.
b. decrease the money supply, which will move output farther from its long-run level.
c. increase the money supply, which will move output back towards its long-run level.
d. increase the money supply, which will move output farther from its long-run level.
Figure 3-7
Refer to Figure3-7. If Bintu must work 2 hours to make each cup, then her production
possibilities frontier is based on how many hours of work?
a. 2 hours
b. 4 hours
c. 8 hours
d. 16 hours
In the graph of the money market, the money supply curve is
a. vertical. It shifts rightward if the Fed buys bonds.
b. vertical. It shifts rightward if the Fed sells bonds.
c. upward sloping. It shifts rightward if the Fed buys bonds.
d. upward sloping. It shifts rightward if the Fed sells bonds.
A newspaper’s classified ads are an example of a market.
a. True
b. False
Gross domestic product adds together many different kinds of goods and services into a
single measure of the value of economic activity. To do this, GDP makes use of
a. market prices.
b. statistical estimates of the value of goods and services to consumers.
c. prices based on the assumption that producers make no profits.
d. the maximum amount consumers would be willing to pay.
Trade with any nation can be mutually beneficial.
a. True
b. False