Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase
more bonds issued by U.S. corporations. Other things the same, these actions
a. raise both U.S. net exports and U.S. net capital outflows.
b. raise U.S. net exports and lower U.S. net capital outflows.
c. lower both U.S. net exports and U.S. net capital outflows.
d. lower U.S. net exports and raise U.S. net capital outflows.
Robert put $15,000 into an account with a fixed interest rate two years ago and now the
account balance is $16,917.66. What rate of interest did Robert earn?
a. 4.5 percent
b. 5.4 percent
c. 6.2 percent
d. 8.0 percent
Suppose the economy is closed with national saving of $3 trillion, consumption of $10
trillion, and government purchases of $4 trillion. What is GDP?
a. $3 trillion
b. $9 trillion
c. $11 trillion
d. $17 trillion
In the open-economy macroeconomic model, the real exchange rate does not affect net
capital outflow.
a. True
b. False
Which of the following changes would notshift the supply curve for a good or service?
a. a change in production technology
b. a change in the price of the good or service
c. a change in expectations about the future price of the good or service
d. a change in input prices
Wheat is the main input in the production of flour. If the price of wheat decreases, then
we would expect the
a. demand for flour to increase.
b. demand for flour to decrease.
c. supply of flour to increase.
d. supply of flour to decrease.
If the money multiplier is 3 and the Fed wants to increase the money supply by
$900,000, it could
a. buy $300,000 worth of bonds.
b. buy $225,000 worth of bonds.
c. sell $300,000 worth of bonds.
d. sell $225,000 worth of bonds.
If the government’s expenditures exceeded its receipts, it would likely
a. lend money to a bank or other financial intermediary.
b. borrow money from a bank or other financial intermediary.
c. buy bonds directly from the public.
d. sell bonds directly to the public.
If the real exchange rate between the U.S. and Japan is 1, the nominal exchange rate is
100 yen per U.S. dollar and the price of chicken in the U.S. is $2.50 per pound, what is
the price of chicken in Japan?
a. 400 yen per pound
b. 250 yen per pound
c. 100 yen per pound
d. 40 yen per pound
In the economy of Talikastan in 2015, consumption was $3000, GDP was $5500,
government purchases were $1000, imports were $1000, and investment was $1000.
What were Talikastan’s exports in 2015?
a.-$500
b. $500
c. $1500
d. $-1500
In a certain economy, jam and bread are produced, and the economy currently operates
on its production possibilities frontier. Which of the following events would allow the
economy to produce more jam and more bread, relative to the quantities of those goods
that are being produced now?
a. Unemployed labor is put to work producing jam and bread.
b. The economy puts its idle capital to work producing jam and bread.
c. The economy experiences economic growth.
d. All of the above are correct.
An increase in the money supply might indicate that the Fed had
a. purchased bonds to increase banks reserves.
b. purchased bonds to decrease banks reserves.
c. sold bonds to increase banks reserves.
d. sold bonds to decrease banks reserves.
The Federal Deposit Insurance Corporation
a. protects depositors in the event of bank failures.
b. has become insolvent in recent years due to a large number of bank failures.
c. is part of the Federal Reserve System.
d. in practice has seldom been of much use.
From 1970 to 1998 the U.S. dollar
a. gained value compared to the German mark because inflation was higher in the U.S.
b. gained value compared to the German mark because inflation was lower in the U.S.
c. lost value compared to the German mark because inflation was higher in the U.S.
d. lost value compared to the German mark because inflation was lower in the U.S.
Quality Motors is a Japanese-owned company that produces automobiles; all of its
automobiles are produced in American plants. In 2010 Quality Motors produced $30
million worth of automobiles, with $17 million in sales to Americans, $9 million in
sales to Canadians, and $4 million worth of automobiles added to Quality Motors’
inventory. The transactions just described contribute how much to U.S. GDP for 2010?
a. $17 million
b. $21 million
c. $26 million
d. $30 million
If Korea is capable of producing either shoes or soccer balls or some combination of the
two, then
a. Korea should specialize in the product in which it has an absolute advantage.
b. it would be impossible for Korea to have an absolute advantage over another country
in both products.
c. it would be difficult for Korea to benefit from trade with another country if Korea is
efficient in the production of both goods.
d. Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.
Figure26-3.The figure shows two demand-for-loanable-funds curves and two
supply-of-loanable-funds curves.
RefertoFigure26-3.Which of the following movements shows the effects of the
government going from a budget surplus to a budget deficit?
a. a movement from Point A to Point B
b. a movement from Point B to Point A
c. a movement from Point A to Point F
d. a movement from Point B to Point C
Which of the following shifts the long-run aggregate supply curve to the left?
a. either an increase in the price of imported natural resources or a reduction in trade
restrictions.
b. neither an increase in the price of imported natural resources or a reduction in trade
restrictions.
c. an increase in the price of imported natural resources and an increase in trade
restrictions.
d. an increase in trade restrictions and a decrease in the price of imported natural
resources.
Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh
Holloway, is an accountant today and he earned $210,000 in 2013. The price index was
17.6 in 1944 and 218.4 in 2013.
RefertoScenario24-3. Josh Holloway’s 2013 income in 1944 dollars is
a. $11,528.
b. $16,923.
c. $149,009.
d. $26,059.
M1 includes
a. small time deposits.
b. savings deposits.
c. other checkable deposits.
d. money market mutual funds.
Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would
induce people to
a. decrease consumption, shown as a movement to the left along a given
aggregate-demand curve.
b. increase consumption, shown as a movement to the right along a given
aggregate-demand curve.
c. decrease consumption, shown by shifting the aggregate-demand curve to the left.
d. increase consumption, shown by shifting the aggregate-demand curve to the right.
Which of the following concepts cannot be illustrated by the production possibilities
frontier?
a. efficiency
b. opportunity cost
c. equality
d. trade-offs
Those who desire that policymakers stabilize the economy would advocate which of the
following when aggregate demand is insufficient to ensure full employment?
a. decrease the money supply
b. increase taxes
c. increase government expenditures
d. Do nothing and let markets correct themselves.
Which of the following things can a government do to lower the costs of inflation?
a. sell inflation-indexed bonds and rewrite tax laws so that real rather than nominal
gains are taxed
b. sell inflation-indexed bonds but not rewrite tax laws so that real rather than nominal
gains are taxed
c. rewrite tax laws so that real rather than nominal gains are taxed, but not sell
inflation-indexed bonds
d. neither sell inflation-indexed bonds nor rewrite tax laws so that real rather than
nominal gains are taxed
The Fed has the power to increase or decrease the number of dollars in the economy
through the decisions of
a. the Board of Governors.
b. the FOMC.
c. the regional Federal Reserve Bank presidents.
d. the U.S. Treasury.
If the nominal interest rate is 3 percent and the inflation rate is 4 percent, then the real
interest rate is
a. 7 percent.
b. -1 percent.
c. 3 percent.
d. 4 percent.
Which of the following is correct concerning stock market irrationality?
a. Bubbles could arise, in part, because the price that people pay for stock depends on
what they think someone else will pay for it in the future.
b. Economists almost all agree that the evidence for stock market irrationality is
convincing and the departures from rational pricing are important.
c. Some evidence for the existence of market irrationality is that informed and
presumably rational managers of mutual funds generally beat the market.
d. All of the above are correct.
If a country has saving of $2 trillion and investment of $1.5 trillion, then it has
a. a trade surplus and its net capital outflow = $.5 trillion.
b. a trade surplus and its net capital outflow = -$.5 trillion.
c. a trade deficit and its net capital outflow = $.5 trillion.
d. a trade deficit and its net capital outflow = -$.5 trillion.
The natural rate of unemployment
(i) is the economy’s desirable level of unemployment.
(ii) arises from a single problem that has a single solution.
(iii) is the amount of unemployment that does not go away on its own.
a. (i) and (ii) only
b. (iii) only
c. (i), (ii), and (iii)
d. None of the above is correct.
By definition, equityfinance
a. is accomplished when units of government sell bonds.
b. is accomplished when firms sell bonds.
c. is accomplished when firms sell shares of stock.
d. involves “fair” interest rates or dividend yields.
Figure 2-14
Consider the production possibilities curve for a country that can produce sweaters,
apples (in bushels), or a combination of the two.
RefertoFigure2-14.If this society is producing at point T,
a. there is unemployment.
b. production is efficient.
c. growth can only be achieved through an advancement in technology.
d. the opportunity cost of producing one more sweater is approximately 40 bushels of
apples.
Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal
exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan
falls?
a. the price of the basket of goods rises in the U.S. and Taiwan.
b. the price of the basket of goods rises in the U.S. and falls in Taiwan.
c. the price of the basket of goods falls in the U.S. and rises in Taiwan.
d. the price of the basket of goods falls in both the U.S. and Taiwan.