A utilities company in the Netherlands buys wind generators made by a U.S. company.
It pays from them with previously obtained dollars. By itself, this exchange
a. increases both U.S. net exports and U.S. net capital outflow.
b. decreases both U.S. net exports and U.S. net capital outflow.
c. increases U.S. net exports and does not affect U.S. net capital outflow.
d. None of the above is correct.
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. If 2013 is the base year, then the CPI for 2012 was
a. 75.3.
b. 100.0.
c. 116.0.
d. 132.8.
When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10.
You compute the price of jeans relative to tee-shirts.
a. The dollar price of jeans and the relative price of jeans are both nominal variables.
b. The dollar price of jeans and the relative price of jeans are both real variables.
c. The dollar price of jeans is a nominal variable; the relative price of jeans is a real
variable.
d. The dollar price of jeans is a real variable; the relative price of jeans is a nominal
variable.
Figure 33-5.
RefertoFigure33-5. The appearance of the long-run aggregate-supply (LRAS) curve
a. is consistent with the concept of monetary neutrality.
b. is consistent with the idea that point A represents a long-run equilibrium and a
short-run equilibrium when the relevant short-run aggregate-supply curve is SRAS1.
c. indicates that Y1is the natural rate of output.
d. All of the above are correct.
You bought some shares of stock and sell them one year later. At the end of the year, the
price per share was 5 percent higher and the price level was 3 percent higher. Before
taxes, you experienced
a. both a nominal gain and a real gain, and you paid taxes on the nominal gain.
b. both a nominal gain and a real gain, and you paid taxes only on the real gain.
c. a nominal gain and a real loss, and you paid taxes on the nominal gain.
d. a nominal gain and a real loss, and you paid no taxes on the transaction.
If a nation is selling more goods and services to foreigners than it is buying from them,
then on net it must be selling assets abroad.
a. True
b. False
The nominal interest rate is 5 percent and the inflation rate is 2 percent. What is the real
interest rate?
a. 7 percent
b. 2.5 percent
c. 10 percent
d. 3 percent
The overriding reason why households and societies face many decisions is that
a. resources are scarce.
b. goods and services are not scarce.
c. incomes fluctuate with business cycles.
d. people, by nature, tend to disagree.
Scenario 26-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private
saving = $225; and national saving = $150.
RefertoScenario26-3.For this economy, GDP equals
a. $1,480.
b. $1,505.
c. $1,460
d. $1,455.
Which of the following is a principle concerning how people interact?
a. Markets are usually a good way to organize economic activity.
b. Rational people think at the margin.
c. People respond to incentives.
d. All of the above are correct.
Changes in the GDP deflator reflect only changes in the prices of goods and services.
a. True
b. False
Matthew bakes apple pies that he sells at the local farmer’s market. If the price of apples
increases, the
a. supply curve for Matthew’s pies will increase.
b. supply curve for Matthew’s pies will decrease.
c. demand curve for Matthew’s pies will increase.
d. demand curve for Matthew’s pies will decrease.
While on a study abroad program you see a McDonald’s in Paris. A combo meal costs 8
euros. The same meal costs $6 in the U.S. and the exchange rate is .75 euros per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the combo meal cheaper?
Figure 3-15
RefertoFigure3-15. The opportunity cost of 1 novel for Perry is
a. 1/6 poem.
b. 2 poems.
c. 6 poems.
d. 12 poems.
We interpret the meaning of “loanable funds” as the
a. flow of resources available from private saving.
b. flow of resources available to fund private investment.
c. resources borrowed by private investors and by government.
d. resources lent by private investors and by government.
Figure 3-18
Refer to Figure3-18. Suppose Juba is willing to trade one bowl to Bintu for every two
cups that Bintu makes and sends to Juba. Which of the following combinations of
bowls and cups could Bintu then consume, assuming Bintu specializes in making cups
and Juba specializes in making bowls?
a. 1 bowl and 7 cups
b. 2 bowls and 4 cups
c. 3 bowls and 3 cups
d. 4 bowls and 1 cup
Most people rely primarily on income other than their labor earnings to maintain their
standard of living.
a. True
b. False
If taxes
a. increase, then consumption increases, and aggregate demand shifts leftward.
b. increase, then consumption decreases, and aggregate demand shifts rightward.
c. decrease, then consumption increases, and aggregate demand shifts rightward.
d. decrease, then consumption decreases, and aggregate demand shifts leftward.
Industrial machinery is an example of
a. a factor of production that in the past was an output from the production process.
b. physical capital.
c. something that influences productivity.
d. All of the above are correct.
The government of country A, which has adopted American GDP accounting
conventions, has calculated that the seasonally-adjusted market value of all final goods
and services produced within country A in quarter 1 was $5 billion. The government
will report that GDP in quarter 1 was
a. $1.25 billion at an annual rate.
b. $4 billion at an annual rate.
c. $5 billion at an annual rate.
d. $20 billion at an annual rate.
A politician blames the Federal Reserve for being ‘soft on unemployment” and claims
that a permanently higher money supply growth rate will lead to a permanent reduction
in the unemployment rate. The politician’s argument is
a. consistent with the long-run Phillips curve. Further, the long-run Phillips curve
implies that such a policy would not increase inflation.
b. consistent with the long-run Phillips curve. However, the long-run Phillips curve
implies that such a policy would increase inflation.
c. inconsistent with the long-run Phillips curve. However, the long-run Phillips curve
implies that such a policy would not increase inflation.
d. inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve
implies that such a policy would increase inflation.
People will want to hold more money if the price level
a. or if the interest rate increases.
b. or if the interest rate decreases.
c. increases or if the interest rate decreases.
d. decreases or if the interest rate increases.
Suppose Spencer and Kate are the only two demanders of lemonade. Each month,
Spencer buys six glasses of lemonade when the price is $1.00 per glass, and he buys
four glasses when the price is $1.50 per glass. Each month, Kate buys four glasses of
lemonade when the price is $1.00 per glass, and she buys two glasses when the price is
$1.50 per glass. Which of the following points is on the market demand curve?
a. B only
b. B and D only
c. A and C only
d. D only
Table 29-4.
RefetoTable29-4. Starting from the situation as depicted by the T-account, if someone
deposits $500 into the First Bank of Fairfield, and if the bank makes new loans so as to
keep its reserve ratio unchanged, then the amount of new loans that it makes will be
a. $40.
b. $437.50.
c. $71.42.
d. $428.57.
Economists agree that if a monetary policy rule is to be used, the best one makes the
growth rate of the money supply constant.
a. True
b. False
In 1979, Fed chair Paul Volcker decided to pursue a policy
a. that would lead to disinflation.
b. that would create falling prices.
c. to accommodate continuing adverse supply shocks.
d. that maintained money growth at its current level.
Figure 2-6
RefertoFigure2-6. The opportunity cost of this economy moving from point K to point
H is
a. zero.
b. 50 blankets.
c. 60 pillows.
d. 50 blankets and 60 pillows.
Table 2-5
Refer to Table2-5. Table 2-5 shows one set of production possibilities. Which of the
following combinations of corn and wheat is not currently attainable but would be
attainable if there was an improvement in overall production technology?
a. 1600 bushels of corn and 300 bushels of wheat
b. 1400 bushels of corn and 800 bushels of wheat
c. 1000 bushels of corn and 2000 bushels of wheat
d. 600 bushels of corn and 1800 bushels of wheat
The Bureau of Labor Statistics’ U5 measure of joblessness is the official unemployment
rate.
a. True
b. False
Table29-3.An economy starts with $50,000 in currency. All of this currency is
deposited into a single bank, and the bank then makes loans totaling $45,750. The
T-account of the bank is shown below.
RefetoTable29-3.If all banks in the economy have the same reserve ratio as this bank,
then an increase in reserves of $150 for this bank has the potential to increase deposits
for all banks by
a. $287.25.
b. $1,614.71.
c. $1,764.71.
d. $2,000 or more.
For a given year, productivity in a particular country is most closely matched with that
country’s
a. level of real GDP over that year.
b. level of real GDP divided by hours worked over that year.
c. growth rate of real GDP divided by hours worked over that year.
d. growth rate of real GDP per person over that year.
Government-run employment agencies and public training programs both seek to
reduce frictional unemployment.
a. True
b. False
Most economists believe that classical theory describes the world
a. in the short run.
b. in the long run.
c. in both the short run and the long run.
d. in neither the short run nor the long run.
Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the
inflation rate is 2 percent, then after one year,
a. Sophia will have 3 percent more money, which will purchase 5 percent more goods.
b. Sophia will have 3 percent more money, which will purchase 7 percent more goods.
c. Sophia will have 5 percent more money, which will purchase 3 percent more goods.
d. Sophia will have 5 percent more money, which will purchase 7 percent more goods.