Fretonia and Libstien are the same except Fretonia has a larger capital stock. Both
countries undertake policies that raise their saving rates to the same higher level. We
would expect that
a. both countries would have permanent increases in their growth rates, but the increase
would initially be larger in Fretonia.
b. both countries would have permanent increases in their growth rates, but the increase
would initially be smaller in Fretonia.
c. both countries would have temporary increases in their growth rates, but the increase
would be larger in Fretonia.
d. both countries would have temporary increases in their growth rates, but the increase
would be smaller in Fretonia.
An increase in a country’s real interest rate reduces that country’s net capital outflow.
a. True
b. False
Table 4-13
The demand schedule below pertains to sandwiches demanded per week.
RefertoTable4-13.Regarding Harry and Darby, whose demand for sandwiches
conforms to the law of demand?
a. only Harry’s
b. only Darby’s
c. both Harry’s and Darby’s
d. neither Harry’s nor Darby’s
Purchasing-power parity says that the nominal exchange rate must equal the real
exchange rate.
a. True
b. False
Suppose that dental hygienists are unionized in the eastern region of the country but not
in the western region. If the unionized workers in the eastern region abolished their
unions, employment
a. and wages of dental hygienists in the eastern region would rise.
b. of dental hygienists in the eastern region would rise, but wages of dental hygienists in
the eastern region would fall.
c. and wages of dental hygienists in the eastern region would fall.
d. of dental hygienists in the eastern region would fall, but wages of dental hygienists in
the eastern region would rise.
Other things the same, as the real interest rate rises
a. domestic investment and net capital outflow both rise.
b. domestic investment and net capital outflow both fall.
c. domestic investment rises and net capital outflow falls.
d. domestic investment falls and net capital outflow rises.
Suppose the banking system currently has $300 billion in reserves, the reserve
requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?
a. $270 billion
b. $5,400 billion
c. $6,000 billion
d. $5,100 billion
Assume the money market is initially in equilibrium. If the price level increases, then
according to liquidity preference theory there is an excess
a. supply of money until the interest rate increases.
b. supply of money until the interest rate decreases.
c. demand for money until the interest rate increases.
d. demand for money until the interest rate decreases.
Causes of the changing role of women in American society over the past several
decades include new technologies that have reduced the amount of time required to
complete routine household tasks, improved birth control, and changing political and
social attitudes.
a. True
b. False
Table 28-2
Labor Data for Aridia
RefetoTable28-2.The unemployment rate of Aridia
a. increased both from 2010 to 2011 and from 2011 to 2012.
b. increased from 2010 to 2011 but decreased from 2011 to 2012.
c. decreased from 2010 to 2011 but increased from 2011 to 2012.
d. decreased both from 2010 to 2011 and from 2011 to 2012.
Which of the following is notcorrect?
a. The regional Federal Reserve Banks play a role in regulating banks and ensuring the
health of the banking system.
b. The President of the New York Federal Reserve Regional Bank always gets to vote
on the decisions made by the Federal Open Market Committee.
c. U.S. monetary policy is made by the Federal Open Market Committee.
d. The Federal Open Market Committee meets every 12 weeks.
Bountiful Tractors has a share price of $60, retained earnings of $2 per share, and a
dividend yield of 2 percent. What is Bountiful Tractor’s priceearnings ratio?
a. 23.1
b. 18.75
c. 15
d. 30
According to purchasing-power parity, if it took 1,100 Korean Won to buy a dollar this
year, but it took 1,000 to buy it last year, then the dollar has
a. appreciated, indicating inflation was higher in the U.S. than in Korea.
b. appreciated indicating inflation was lower in the U.S. than in Korea.
c. depreciated indicating inflation was higher in the U.S. than in Korea.
d. depreciated indicating inflation was lower in the U.S. than in Korea.
Figure 3-15
RefertoFigure3-15.Perry has an absolute advantage in the production of
a. novels and Jordan has an absolute advantage in the production of poems.
b. poems and Jordan has an absolute advantage in the production of novels.
c. novels and Jordan has an absolute advantage in the production of neither good.
d. neither good and Jordan has an absolute advantage in the production of novels.
Which of the following would shift the demand for loanable funds to the right?
a. income tax increases
b. government expenditures increase
c. the interest rate falls
d. Congress and the president pass an investment tax credit
There are always some workers without jobs, even when the overall economy is doing
well.
a. True
b. False
Which of the following is notcorrect?
a. The model of aggregate demand and aggregate supply is used by most economists to
analyze short-run fluctuations.
b. During a recession firms cut back production and workers are laid off.
c. A recession is a period of declining real incomes and declining unemployment.
d. A depression is a severe recession.
Which of the following typically rises during a recession?
a. investment.
b. unemployment.
c. tax revenues.
d. new home construction.
According to the rule of 70, if you earn an interest rate of 3.5 percent, your savings will
double about every 20 years.
a. True
b. False
A company that can build a project that will cost $50,000, but returns $52,000 in one
year would make a good decision by turning this project down if the interest rate were 3
percent.
a. True
b. False
Suppose that money supply growth increases. In the long run, this increases
employment according to
a. both the long-run Phillips curve and the aggregate demand and aggregate supply
model.
b. neither the long-run Phillips curve nor the aggregate demand and aggregate supply
model.
c. the long-run Phillips curve, but not the aggregate demand and aggregate supply
model.
d. the aggregate demand and aggregate supply model, but not the long-run Phillips
curve
If your firm’s production function has constant returns to scale and you increase all your
inputs by 60%, then your firm’s output will
a. not change.
b. increase, but by less than 60%
c. increase by 60%
d. increase by more than 60%.
A bond buyer is a
a. saver. Bond buyers must hold their bonds until maturity.
b. saver. Bond buyers may sell their bonds prior to maturity.
c. borrower. Bond buyers must hold their bonds until maturity.
d. borrower. Bond buyers may sell their bonds prior to maturity.
In an open economy,
a. net capital outflow = imports.
b. net capital outflow = net exports.
c. net capital outflow = exports.
d. None of the above is correct.
Table 23-1
The table below contains data for Chereaux for the year 2015.
RefertoTable23-1. Gross national product for Chereaux in 2015 is
a. $186.
b. $214.
c. $200.
d. $204.
If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to
the money supply?
a. it increases by $100,000
b. it increases by $150,000
c. it decreases by $100,000
d. it decreases by $200,000
Figure 35-8
Use this graph to answer the questions below.
Refertofigure35-8.If the economy starts at 5% unemployment and 5% inflation then if
the Federal Reserve pursues a contractionary monetary policy, in the short run the
economy moves to
a. 3% unemployment and 5% inflation. In the long run the economy moves to 5%
unemployment and 5% inflation.
b. 3% unemployment and 5% inflation. In the long run the economy moves to 5%
unemployment and 3% inflation.
c. 7% unemployment and 3% inflation. In the long run the economy moves to 5%
unemployment and 5% inflation.
d. 7% unemployment and 3% inflation. In the long run the economy moves to 5%
unemployment and 3% inflation.
The regional Federal Reserve Banks
a. are not allowed to make loans to banks in their region.
b. regulate banks in their regions.
c. have more voting members on the FOMC than does the Board of Governors.
d. are each headed by a member of the Board of Governors.
Table 28-4
2010 Labor Data for Adults (ages 16 and older) in Meditor
RefetoTable28-4. What is the adult male unemployment rate in Meditor?
a. 3.7%
b. 5.0%
c. 5.6%
d. 5.9%
In 2009, the U.S. government’s budget deficit increased substantially. Other things the
same, this means the
a. supply of loanable funds shifted to the right.
b. supply of loanable funds shifted to the left.
c. demand for loanable funds shifted to the right.
d. demand for loanable funds shifted to the left.
Other things the same, if the government increases transfer payments to households,
then the effect of this on the government’s budget
a. will make investment rise.
b. will make the rate of interest rise.
c. will make public saving rise.
d. All of the above are correct.
You have been promised a payment of $100,000 in the future. In which case is the
present value of this future payment highest?
a. You receive the payment 2 years from now and the interest rate is 6 percent.
b. You receive the payment 2 years from now and the interest rate is 4 percent.
c. You receive the payment 3 years from now and the interest rate is 6 percent.
d. You receive the payment 3 years from now and the interest rate is 4 percent.
The long-run response to an increase in the growth rate of the money supply is shown
by shifting
a. the short-run and long-run Phillips curves left.
b. the short-run and long-run Phillips curves right.
c. only the short-run Phillips curve left.
d. only the short-run Phillips curve right.
When the U.S. real interest rate falls
a. U.S. purchases of foreign assets and foreign purchases of U.S. assets rise
b. U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall
c. U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise
d. U.S. purchases of foreign assets and foreign purchases of U.S. assets fall
A country has national saving of $80 billion, government expenditures of $40 billion,
domestic investment of $50 billion, and net capital outflow of $30 billion. What is its
supply of loanable funds?
a. $30 billion
b. $40 billion
c. $50 billion
d. $80 billion
Budget in Recession
During a recession government revenues from the income tax fall and government
transfers rise as the reduction in income and the rise in unemployment raise the number
of people who qualify for benefits.
RefertoBudgetinRecessio. What does this change in the budget deficit do to the
equilibrium values of the interest rate and the quantity of loanable funds?
Give two conditions that are important to the efficient market theory. List one
implication of the efficient market theory.
Are sales of used goods included in GDP? Explain why or why not. Hint: Remember
how GDP is defined.
Scenario 27-1
Lisa has a utility function where Wis Lisa’s wealth in millions of dollars
and Uis the utility she obtains.
RefetoScenario27-1.Suppose Lisa is faced with a choice between two options. With
option A Lisa receives a guaranteed $9 million. With option B Lisa faces a lottery that
pays $16 million with probability Pand pays $4 million with probability (1-P). Given
Lisa’s utility function, how high does Pneed to be before Lisa will prefer option B?
Figure 2-3
RefertoFigure2-3.What does the arrow going from oval A to rectangle 2 represent in
the figure?
If asset prices fall and inflation expectations remain unchanged, what happens to
inflation and unemployment? Defend your answer.
What is the source of the supply of dollars in the market for foreign-currency
exchange?
Scenario 1-5
Suppose that you have a choice between going to the movies with a friend for three
hours or working at your job. If you go to the movies, you will spend $12 on a ticket
and $6 on popcorn. If you choose to work, you will earn $10 an hour.
RefertoScenario1-5.What is your opportunity cost of working?
Table 23-11
The country of Batavia produces only chocolates and watches. Below is a table with
recent information on Batavia production and prices. The base year is 2009.
Prices and Quantities
Refer to Table 23-11.
What was the inflation rate for 2010? Show your work.
What fiscal policies did the government implement in response to the 2008-2009
recession? Can we be certain that these policies were effective? Explain.
Name two macroeconomic variables that decline when an economy goes into recession,
and name one macroeconomic variable that rises.
Suppose that a central bank reduces the money supply growth rate to disinflate. What
does disinflation mean? If people do not alter their inflation expectations, what happens
to output and unemployment?
Most spells of unemployment are short, and most unemployment observed at any given
time is long term. How can this be?
The Phillips curve and the short-run aggregate supply curve are closely related, yet one
slopes downward and the other slopes upward. Discuss.
Make a list of things that would shift the long-run aggregate supply curve to the right.
Write the rule of 70. Suppose that your great-great-grandmother put $50 in a savings
account 100 years ago and the account is now worth $1,600. Use the rule of 70 to
determine about what interest rate she earned.
Shoe Quota
Concerns raised about the declining U.S. shoe industry and unfair labor practices in
foreign shoe factories lead the Congress and President to impose a quota on shoe
imports.
RefertoShoeQuota. As a result of the quota, is there initially a surplus or a shortage in
the market for foreign- currency exchange? Carefully explain how people’s response to
this surplus or shortage and the resulting changes in their behavior leads to a new
equilibrium exchange rate.
What are the basic differences between bonds and stocks?
What is the TermAuctionFacility?