Which of the following statements is correct?
a. The demand for flat-screen computer monitors is more elastic than the demand for
monitors in general.
b. The demand for grandfather clocks is more elastic than the demand for clocks in
general.
c. The demand for cardboard is more elastic over a long period of time than over a short
period of time.
d. All of the above are correct.
Which of the following changes in the price index produces the greatest rate of
inflation: 106 to 112, 112 to 118, or 118 to 124?
a. 106 to 112
b. 112 to 120
c. 118 to 126
d. All of these changes produce the same rate of inflation.
Which of the following individuals serve a four-year term?
a. the members of the Board of Governors
b. the Chair of the Board of Governors
c. the members of the FOMC
d. All of the above are correct.
Figure 4-1
Refer to Figure 4-1. The movement from point A to point B on the graph is caused by
a. an increase in price.
b. a decrease in price.
c. a decrease in the price of a substitute good.
d. an increase in income.
Total surplus is
a. the total cost to sellers of providing the good minus the total value of the good to
buyers.
b. the total value of the good to buyers minus the cost to sellers of providing the good.
c. the difference between consumer surplus and sellers’ cost.
d. always smaller than producer surplus.
Midwestern corporation issues bonds. Southern corporation issues stock. Which
corporation used equity financing?
a. both Midwestern corporation and Southern corporation
b. Midwestern corporation but not Southern corporation
c. Southern corporation but not Midwestern corporation
d. neither Midwestern nor Southern corporation
Table 15-2
2009 Labor Data for Baltivia
Refer to Table 15-2. What was Baltivia’s labor-force participation rate in 2009?
a. 55 percent
b. 63 percent
c. 66.9 percent
d. 87.3 percent
Inflation can be measured by the
a. change in the consumer price index.
b. percentage change in the consumer price index.
c. percentage change in the price of a specific commodity.
d. change in the price of a specific commodity.
Scenario 16-2.
The Monetary Policy of Tazi is controlled by the country’s central bank known as the
Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show
that collectively the banks of Tazi hold 300 million tazes of required reserves, 75
million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold
225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits
and so all money is on deposit at the bank.
Refer to Scenario 16-2. Suppose the Bank of Tazi loaned the banks of Tazi 10 million
tazes. Suppose also that both the reserve requirement and the percentage of deposits
held as excess reserves stay the same. By how much would the money supply change?
a. 250 million tazes
b. 200 million tazes
c. 125 million tazes
d. None of the above is correct.
In the United States, nominal interest rates were
a. high in the 1970s and 1990s.
b. low in the 1970s and 1990s.
c. high in the 1970s and low in the 1990s.
d. low in the 1970s and high in the 1990s.
The nominal exchange rate is 30 Thai bhat for one U.S. dollar. A sub sandwich combo
deal in the U.S. costs $6 dollars in the U.S. and 120 bhat in Thailand. The real exchange
rate is
a. 3/8
b. 2/3
c. 3/2
d. 8/3
Imagine that someone offers you $100 today or $200 in 10 years. You would prefer to
take the $100 today if the interest rate is
a. 4 percent.
b. 6 percent.
c. 8 percent.
d. All of the above are correct.
If the budget deficit were reduced
a. interest rates and investment would increase.
b. interest rates would increase and investment would decrease.
c. interest rates and investment would decrease.
d. interest rates would decrease and investment would increase.
An increase in the price of a good will
a. increase demand.
b. decrease demand.
c. increase quantity demanded.
d. decrease quantity demanded.
When policymakers are considering a particular action, they can use consumer surplus
as a(n)
a. objective measure of the benefits to buyers as determined by policymakers.
b. measure of the benefits to buyers as the buyers perceive them.
c. potentially flawed measure of the benefits to buyers if the buyers are not rational.
d. Both b) and c) are correct.
Real and nominal variables are highly intertwined, and changes in the money supply
change real GDP. Most economists would agree that this statement accurately describes
a. both the short run and the long run.
b. the short run, but not the long run.
c. the long run, but not the short run.
d. neither the long run nor the short run.
In the 1990s, Fed Chair Alan Greenspan believed that the market was
a. undervalued, and evidence later showed that this was clearly correct.
b. undervalued, but whether it was remains debatable.
c. overvalued, and evidence later showed that this was clearly correct.
d. overvalued, but whether it was remains debatable.
According to 2009 data on the U.S. population, which of the following groups of adults
(ages 20 and older) had the lowest unemployment rate?
a. white males
b. white females
c. black males
d. black females
In the short run, an increase in the money supply causes interest rates to
a. increase, and aggregate demand to shift right.
b. increase, and aggregate demand to shift left.
c. decrease, and aggregate demand to shift right.
d. decrease, and aggregate demand to shift left.
In the U.S., each additional year of schooling has historically raised a person’s wage on
average by about
a. 2 percent.
b. 5 percent.
c. 10 percent.
d. 15 percent.
One disadvantage of government subsidies over price controls is that subsidies
a. prevent the attainment of equilibrium in the markets in which they are imposed.
b. make higher taxes necessary.
c. are always unfair to those with low incomes.
d. cause unemployment.
Eloise deposits $250 into an account and one year later has $272.50. What interest rate
was paid on Eloise’s deposit?
a. 8 percent
b. 9 percent
c. 10 percent
d. None of the above is correct.
If a increase in income decreases the demand for a good, then the good is a(n)
a. substitute good.
b. complementary good.
c. normal good.
d. inferior good.
Table 3-5
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed
to Make 1 Unit of Number of Units
Produced in 40 Hours
Refer to Table 3-5. Without trade, England produced and consumed 32 units of cheese
and 2 units of bread and Spain produced and consumed 6 units of cheese and 2 units of
bread. Then, each country agreed to specialize in the production of the good in which it
has a comparative advantage and trade 7 units of cheese for 2.5 units of bread. As a
result, England gained
a. 0 units of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit
of bread.
b. 1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit
of bread.
c. 7 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5
units of bread.
d. 33 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5
units of bread.
Table 3-10
Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Minutes Needed to Number of Cellular Phones
Programmed or Tested in a
40-Hour Week
Program 1
Cellular Phone Test 1
Cellular Phone Cellular Phones
Programmed Cellular Phones
Refer to Table 3-10. Which of the following points would be on Juanita’s production
possibilities frontier, based on a 40-hour week?
a. (120 cellular phones programmed, 295 cellular phones tested)
b. (130 cellular phones programmed, 225 cellular phones tested)
c. (140 cellular phones programmed, 155 cellular phones tested)
d. Both (a) and (b) would be on Juanita’s production possibilities frontier.
Which of the following is an example of a normative, as opposed to positive,
statement?
a. If the price of a product decreases, people’s willingness to buy that product will
increase.
b. Reducing tax rates on the wealthy would benefit the nation.
c. If the national saving rate were to increase, so would the rate of economic growth.
d. The elimination of trade restrictions would increase an economy’s standard of living.
Suppose the United States has a comparative advantage over Mexico in producing pork.
The principle of comparative advantage asserts that
a. the United States should produce more pork than what it requires and export some of
it to Mexico.
b. the United States should produce a moderate quantity of pork and import the
remainder of what it requires from Mexico.
c. the United States should refrain altogether from producing pork and import all of
what it requires from Mexico.
d. Mexico has nothing to gain from importing United States pork.
Your accountant tells you that if you can continue to earn the current interest rate on
your balance of $800 for the next two years you will have $898.88 in your account. If
your accountant is correct what is the current interest rate?
a. 6 percent
b. 7 percent
c. 8 percent
d. 9 percent
The recessions of the 1970s are often attributed to
a. declining inflation expectations.
b. an increase in oil prices.
c. declines in the price of stock.
d. decreases in the money supply.
Over the past several decades in the United States, the labor-force participation rate of
women has
a. increased and the labor-force participation rate of men has increased.
b. increased and the labor-force participation rate of men has decreased.
c. decreased and the labor-force participation rate of men has increased.
d. decreased and the labor-force participation rate of men has decreased.
A limit on the quantity of a good produced abroad that can be purchased domestically is
called a(n)
a. tariff.
b. excise tax.
c. import quota.
d. None of the above is correct.
Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Refer to Table 3-1. Assume that Andia and Zardia each has 60 minutes available. If
each person spends all his time producing the good in which he has a comparative
advantage, then total production is
a. 3 bushels of wheat and 6 pounds of beef.
b. 3.5 bushels of wheat and 5.5 pounds of beef.
c. 4 bushels of wheat and 5 pounds of beef.
d. 7 bushels of wheat and 11 pounds of beef.
Two individuals engage in the same two productive activities. In which of the following
circumstances would neither individual have a comparative advantage in either
activity?
a. One individual’s production possibilities frontier is steeper than the other individual’s
production possibilities frontier.
b. One individual is faster at both activities than the other individual.
c. One individual’s opportunity costs are the same as the other individual’s opportunity
costs.
d. None of the above is correct; one of the two individuals always will have a
comparative advantage in at least one of the two activities.
When the government budget deficit rises, national saving is reduced, interest rates rise,
and investment falls.
Other things the same, an increase in foreign prices raises the real exchange rate.
Proponents and opponents of balanced-budget policies agree that the government debt
cannot continue to increase forever.
Why do higher real interest rates lead to lower net capital outflow?
The demand for labor by a certain firm fluctuates as the demand for that firm’s product
fluctuates.
Positive statements are descriptive, while normative statements are prescriptive.
Draw and label a graph showing equilibrium in the market for loanable funds.
The midpoint method is used to calculate elasticity between two points because it gives
the same answer regardless of the direction of the change.
According to fundamental analysis, when choosing stocks for your portfolio, you
should prefer undervalued stocks.
A decrease in the price of creamer will increase the equilibrium price and decrease the
equilibrium quantity in the market for coffee.
When the consumer price index falls, the typical family has to spend fewer dollars to
maintain the same standard of living.
The logic behind the tradeoff between inflation and unemployment is that high
aggregate demand puts upward pressure on wages and prices while raising output.
When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that
country become worse off.
The GDP deflator can be used to take inflation out of nominal GDP.
Figure 2-14
Refer to Figure 2-14. If this economy uses all its resources in the dishwasher industry,
it produces 35 dishwashers and no doghouses.
Commodity money cannot be used as a unit of account.
Full-time students and homemakers are included in the Bureau of Labor Statistics’
“unemployed” category.
How do outward-oriented policies affect a nation’s productivity?
Over the period 1890-2008, Japan experienced a 2.71 percent average annual growth
rate of real GDP per person.