If businesses in general decide that they have overbuilt and so now have too much
capital, their response to this would initially shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
Which of the following is nota characteristic of a perfectly competitive market?
a. Different sellers sell identical products.
b. There are many sellers.
c. Sellers must accept the price the market determines.
d. All of the above are characteristics of a perfectly competitive market.
The destruction of manufacturing jobs and workers leaving their jobs to find better ones
both contribute to frictional unemployment.
a. True
b. False
Suppose the price for one gallon of gasoline rises from $3.50 to $4.00 and the price of
one gallon of milk rises from $3.00 to $3.20. If the CPI rises from 120 to 132, then
people likely will buy
a. more gasoline and more milk.
b. more gasoline and fewer milk.
c. less gasoline and more milk.
d. less gasoline and fewer milk.
The GDP deflator reflects the prices of all goods and services producedaroundtheworld,
whereas the consumer price index reflects the prices of all goods and services bought
byconsumer.
a. True
b. False
New home construction is included in the consumption component of GDP.
a. True
b. False
Table 3-32
USandFrenchProductionOpportunities
RefertoTable3-32France has an absolute advantage in the production of
a. wine.
b. cheese.
c. both wine and cheese.
d. neither wine nor cheese.
GDP does not make adjustments for leisure time, environmental quality, or volunteer
work.
a. True
b. False
Table 3-7
Assume that the farmer and the rancher can switch between producing meat and
producing potatoes at a constant rate.
Refer to Table3-7. Which of the following combinations of meat and potatoes could
the rancher not produce in 24 hours?
a. 5 pounds of meat and 1 pounds of potatoes.
b. 2 pounds of meat and 2 pounds of potatoes.
c. 1 pounds of meat and 3 pounds of potatoes.
d. 4 pounds of meat and 1 pound of potatoes.
Table 23-6
The table below contains data for the country of Batterland, which produces only
waffles and pancakes. The base year is 2013.
RefertoTable23-6.In 2013, this country’s real GDP was
a. $500.
b. $700.
c. $900.
d. $1200.
When the price of nuclear missiles rises, this change is reflected in the CPI but not in
the GDP deflator.
a. True
b. False
Positive statements are descriptive, while normative statements are prescriptive.
a. True
b. False
Malthus predicted that the power of population
a. was greater than the power of the earth to produce subsistence. His forecast was on
the mark.
b. was greater than the power of the earth to produce subsistence. His forecast was off
the mark.
c. was less than the power of the earth to produce subsistence. His forecast was on the
mark.
d. was less than the power of the earth to produce subsistence. His forecast was off the
mark.
Suppose the economy is in long-run equilibrium. Concerns about pollution cause the
government to significantly restrict the production of electricity. At the same time, taxes
fall. In the short-run
a. real GDP will rise, and the price level might rise, fall, or stay the same.
b. real GDP will fall, and the price level might rise, fall, or stay the same.
c. the price level will rise, and real GDP might rise, fall, or stay the same.
d. the price level will fall, and real GDP might rise, fall, or stay the same.
Both fulltime and parttime workers are included in the Bureau of Labor Statistics’
“employed” category.
a. True
b. False
If money is neutral and velocity is stable, an increase in the money supply creates a
proportional increase in
a. real output only.
b. nominal output only.
c. the price level only.
d. both the price level and nominal output.
Fundamental analysis shows that stock in Johnson’s Lumber Company has a price that
is less than its present value.
a. This stock is overvalued; you should consider adding it to your portfolio.
b. This stock is overvalued; you shouldn’t consider adding it to your portfolio.
c. This stock is undervalued; you should consider adding it to your portfolio.
d. This stock is undervalued; you shouldn’t consider adding it to your portfolio.
Productivity is the
a. key determinant of living standards, and growth in productivity is the key
determinant of growth in living standards.
b. key determinant of living standards, but growth in productivity is not the key
determinant of growth in living standards.
c. not the key determinant of living standards, but growth in productivity is the key
determinant of growth in living standards.
d. not the key determinant of living standards, and growth in productivity is not the key
determinant of growth in living standards.
If a production function has constant returns to scale, output can be doubled if
a. labor alone doubles.
b. all inputs but labor double.
c. all of the inputs double.
d. None of the above is correct.
Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the
company of $4.80 million. If the company builds a 25thhouse, its total cost will increase
to $5.05 million. Which of the following statements is correct?
a. For the first 24 houses, the average cost per house was $205,000.
b. The marginal cost of the 25thhouse, if it is built, will equal $250,000.
c. If the company can sell the 25thhouse for at least $202,000, then it should build it.
d. All of the above are correct.
Table 3-30
Assume that Falda and Varick can switch between producing wheat and producing cloth
at a constant rate.
RefertoTable3-30.Falda has an absolute advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
During recessions, the government tends to run a budget deficit.
a. True
b. False
Which of the following is nota central bank?
a. The Bank of England
b. The Bank of Japan
c. The Bank of America
d. The Federal Reserve
In a closed economy, if Y remained the same, but G rose, T rose by the same amount as
G, and C fell but by less than the increase in T, what would happen to private and
national saving?
a. national saving would fall and private saving would rise
b. national saving would rise and private saving would fall
c. both national saving and private saving would fall
d. None of the above is correct.
When the money supply increases
a. interest rates fall and so aggregate demand shifts right.
b. interest rates fall and so aggregate demand shifts left.
c. interest rates rise and so aggregate demand shifts right.
d. interest rates rise and so aggregate demand shifts left.
If a country were to increase its saving rate, then in the long run it would also increase
its
a. level of income.
b. growth rate of income.
c. growth rate of productivity.
d. All of the above are correct.
Which of the following is correct?
a. The GDP deflator is better than the CPI at reflecting the goods and services bought
by consumers.
b. The CPI is better than the GDP deflator at reflecting the goods and services bought
by consumers.
c. The GDP deflator and the CPI are equally good at reflecting the goods and services
bought by consumers.
d. The GDP deflator is more commonly used as a gauge of inflation than the CPI is.
Which of the following is notincluded in M1?
a. currency
b. demand deposits
c. traveler’s checks
d. credit cards
RefertoFigure35-7. The economy would move from 3 to 5
a. in the short run if money supply growth increased unexpectedly.
b. in the short run if money supply growth decreased unexpectedly.
c. in the long run if money supply growth increases.
d. in the long run if money supply growth decreases.
As the price level rises
a. people are more willing to lend, so interest rates rise.
b. people are more willing to lend, so interest rates fall.
c. people are less willing to lend, so interest rates fall.
d. people are less willing to lend, so interest rates rise.
When the dollar appreciates, U.S.
a. net exports rise, which increases the aggregate quantity of goods and services
demanded.
b. net exports rise, which decreases the aggregate quantity of goods and services
demanded.
c. net exports fall, which increases the aggregate quantity of goods and services
demanded.
d. net exports fall, which decreases the aggregate quantity of goods and services
demanded.
If inflation falls,
a. people choose to put in more effort to keep money balances low. When inflation is
unexpectedly low it redistributes wealth from lenders to borrowers.
b. people choose to put in more effort to keep money balances low. When inflation is
unexpectedly low it redistributes wealth from borrowers to lenders.
c. people choose to put in less effort to keep money balances low. When inflation is
unexpectedly low it redistributes wealth from lenders to borrowers.
d. people choose to put in less effort to keep money balances low. When inflation is
unexpectedly low it redistributes wealth from borrowers to lenders.