Fundamental analysis shows that stock in Widgets-R-Us has a present value that is
lower than its price.
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.
Economists use the term inflation to describe a situation in which
a. some prices are rising faster than others.
b. the economy’s overall price level is rising.
c. the economy’s overall price level is high, but not necessarily rising.
d. the economy’s overall output of goods and services is rising faster than the economy’s
overall price level.
If people become less optimistic about the future earnings of Hyde Park Jazz Studio,
then the price of the company’s stock will fall.
a. True
b. False
Which of the following examples does notillustrate the principle represented by the
adage, “There is no such thing as a free lunch”?
a. Melissa needs to pay her rent and her electric bill.
b. Kevin must choose between buying a new flat screen television and buying his
textbooks for this semester.
c. Robert must decide between studying for his psychology exam and working at his
part-time job.
d. Lisa can spend her money on a new smart phone or on a weekend trip.
In the long run, the level of output
a. depends on the money supply.
b. depends on the price level.
c. is determined by supply-side factors.
d. All of the above are correct.
If output is above its natural rate, then according to sticky-wage theory
a. workers and firms will strike bargains for higher wages. This increase in wages shifts
the short-run aggregate supply curve right.
b. workers and firms will strike bargains for higher wages. This increase in wages shifts
the short-run aggregate supply curve left.
c. workers and firms will strike bargains for lower wages. This decrease in wages shifts
the short-run aggregate supply curve right.
d. workers and firms will strike bargains for lower wages. This decrease in wages shifts
the short-run aggregate supply curve left.
Table 3-30
Assume that Falda and Varick can switch between producing wheat and producing cloth
at a constant rate.
RefertoTable3-30.Varick has a comparative advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
In 2013, ABC Corporation had total earnings of $200 million and 40 million shares of
the corporation’s stock were outstanding. If the price-earnings ratio for ABC is 20, then
what is the price of a share of its stock?
a. $5
b. b. $10
c. c. $80
d. $100
Which of the following shifts aggregate demand right?
a. both a decrease in the price level and the implementation of an investment tax credit
b. a decrease in the price level but not the implementation of an investment tax credit
c. the implementation of an investment tax credit but not a decrease in the price level
d. neither a decrease in the price level nor the implementation of an investment tax
credit
“Money is a veil” best describes the
a. new-Keynesian view.
b. Keynesian view.
c. classical view.
d. economy in the short run but not the long run.
In an open economy, national saving can be less than investment.
a. True
b. False
If the budget deficit increases then
a. saving and the interest rate rise
b. saving rises and the interest rate falls
c. saving falls and the interest rate rises
d. saving and the interest rate falls
A favorable supply shock will shift short-run aggregate supply
a. left, making output rise.
b. left, making output fall.
c. right, making output rise.
d. right, making output fall.
Imagine that two years ago you inherited $20,000 and put it into an account paying a
fixed 8 percent annual interest rate. How much money do you have in your account
now?
a. $22,880.00
b. $23,200.00
c. $23,232.00
d. $23,328.00
In the economy of Talikastan in 2015, consumption was $200, exports were $150, GDP
was $475, government purchases were $100, imports were $75, and investment was
$100. What were Talikastan’s net exports in 2015?
a. -$75
b. -$225
c. $225
d. $75
Which of the following would do the most to reduce a trade deficit?
a. increase domestic saving
b. increase domestic political stability and respect of property rights
c. other countries reduce their trade restrictions
d. raise tariffs
Which of the following are effects of an increased budget deficit?
a. the supply of loanable funds does not change; a higher interest rate reduces private
saving
b. the supply of loanable funds does not change; a higher interest rate raises private
saving
c. at any interest rate the supply of loanable funds is less; a higher interest rate reduces
private saving
d. at any interest rate the supply of loanable funds is less; a higher interest rate raises
private saving
Figure 35-4. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the left-hand diagram, the price level is
measured on the vertical axis; on the right-hand diagram, the inflation rate is measured
on the vertical axis.
RefertoFigure35-4.Assume the figure charts possible outcomes for the year 2018. In
2018, the economy is at point B on the left-hand graph, which corresponds to point B
on the right-hand graph. Also, point A on the left-hand graph corresponds to A on the
right-hand graph. The price level in the year 2018 is
a. 117.25.
b. 114.95.
c. 113.12.
d. 111.10.
Table 24-1
The table below lists annual consumer price index and inflation rates for a country over
the period 2005-2010. Assume the year 2005 is used as the base year.
RefertoTable24-1. What belongs in space A?
a. 14
b. 150
c. 144
d. 154
If real GDP is higher in one country than in another, then we can be sure that the
standard of living is higher in the country with the higher real GDP.
a. True
b. False
A law that requires the money supply to grow by a fixed percentage each year would
eliminate
a. the time inconsistency problem, but not political business cycles.
b. the political business cycle, but not the time inconsistency problem.
c. both the time inconsistency problem and political business cycles.
d. neither the time inconsistency problem nor political business cycles.
If there is a shortage of loanable funds, then
a. the demand for loanable funds will shift right so the real interest rate rises.
b. the supply of loanable funds will shift left so the real interest rate falls.
c. there will be no shifts of the curves, but the real interest rate rises.
d. there will be no shifts of the curves, but the real interest rate falls.
Reports on the current consumer price index are released every
a. quarter.
b. two weeks.
c. month.
d. week.
Suppose that someone makes the argument that because empty alcohol containers are
found at many accidents, the containers cause accidents. This would be an example of
a. sound logic.
b. reverse causality.
c. omitted variables.
d. bias.
Suppose that in one hour Dewey can produce either 10 bushels of corn or 20 yards of
cloth. Dewey’s opportunity cost of producing one bushel of corn is 1/2 yard of cloth.
a. True
b. False
If the American company Stryker builds and operates a new factory in France,
a. it engages in foreign direct investment. By itself this action lowers U.S. net capital
outflow.
b. it engages in foreign direct investment. By itself this action raises U.S. net capital
outflow.
c. it engages in foreign portfolio investment. By itself this action lowers U.S. net capital
outflow.
d. it engages in foreign portfolio investment. By itself this action raises U.S. net capital
outflow.
Which of the following might cause the supply curve for an inferior good to shift to the
right?
a. an increase in input prices
b. a decrease in consumer income
c. an improvement in production technology that makes production of the good more
profitable
d. a decrease in the number of sellers in the market
Table 3-6
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Refer to Table3-6. Assume that Zimbabwe and Portugal each has 180 machine minutes
available. If each country divides its time equally between the production of
toothbrushes and hairbrushes, then total production is
a. 24 toothbrushes and 12 hairbrushes.
b. 48 toothbrushes and 24 hairbrushes.
c. 96 toothbrushes and 48 hairbrushes.
d. 720 toothbrushes and 1440 hairbrushes.
To increase the money supply, the Fed can
a. buy government bonds or increase the discount rate.
b. buy government bonds or decrease the discount rate.
c. sell government bonds or increase the discount rate.
d. sell government bonds or decrease the discount rate.
Table 23-5
The country of Caspir produces only cereal and milk. Quantities and prices of these
goods for the last several years are shown below. The base year is 2015.
Prices and Quantities
RefertoTable23-5.In 2015, this country’s
a. nominal GDP was greater than real GDP, and the GDP deflator was greater than 100.
b. nominal GDP was equal to real GDP, and the GDP deflator was equal to 100%.
c. nominal GDP was less than real GDP, and the GDP deflator was less than 100.
d. nominal GDP was equal to real GDP, and the GDP deflator was equal to 100.
Suppose an economy’s production consists only of corn and soybeans. In 2010, 20
bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per
bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1
per bushel. Using 2009 as the base year, it follows that, for 2010,
a. nominal GDP is $50, real GDP is $100, and the GDP deflator is 50.
b. nominal GDP is $50, real GDP is $100, and the GDP deflator is 200.
c. nominal GDP is $100, real GDP is $50, and the GDP deflator is 50.
d. nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.
A low P/E for a stock indicates that
a. people may expect earnings to fall in the future, perhaps because the firm will be
faced with increased competition.
b. its dividends have been low so that no one is willing to pay very much for it.
c. the corporation is possibly overvalued.
d. All of the above are correct.
Which of the following was notamong the four industries with the largest employment
in the United States a century ago?
a. cotton goods
b. men’s clothing
c. meat packing
d. lumber
The opportunity cost of something is what you give up to get it.
a. True
b. False
What are the two basic types of economies?
What curve shows the quantity of goods and services that households, firms, the
government, and customers abroad want to buy at each price level?
Explain how an attempt by the government to lower inflation could cause
unemployment to increase in the short-run.
Some economists argue that policymakers can use monetary and fiscal policy to reduce
the severity of economic fluctuations. What are some things policymakers can do when
higher inflation becomes a concern?
When tax code changes reduce investment incentives, the _____ for loanable funds
curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____
in investment.
During recessions, even with no changes in policy, the deficit tends to ______ because
_____________.
Why did farmers in the late 1800s dislike deflation?
Some economists argue suddenly reducing money supply growth is a costly way to
reduce inflation and that it may not work. For example, if a government cuts money
growth but makes no real fiscal reforms, people will expect the government will
eventually need to expand the money supply to pay for its expenditures. Thus, the
promise to fight inflation will not be credible. Explain why credibility is important to a
reduction in the inflation rate.
Ignoring the differences across states, explain the benefit provided to the typical worker
in the United States from unemployment insurance.
Write the equation representing the short-run Phillips curve.
What is the main function of the financial system?
Last year a country sold $500 billion euros worth of goods to foreigners and had a trade
deficit of $100 billion euros. What was the value of its imports?
A decrease in the value of money __________ the quantity of money demanded. On a
graph with the value of money on the vertical axis this effect on the value of money on
quantity demanded is shown as ____________.
Figure 2-14
Consider the production possibilities curve for a country that can produce sweaters,
apples (in bushels), or a combination of the two.
Refer to Figure2-14. Which point(s) on the graph is(are) unattainable given current
resources and technology?
Permanent tax changes have a effect on aggregate demand compared to temporary tax
changes.
Suppose a bank purchases $50 of government securities using funds from reserves.
How much do bank assets change as a result of this transaction?
Table 4-15
The following table shows the number of cases of water each seller is willing to sell at
the prices listed.
RefertoTable4-15.If only Brook Mountain and Cascade Waters operate in this market,
what is the market quantity supplied when the price is $3.00 per case?
How are the effects of the financial crisis shown using the Phillips curve diagram?
Other things the same, if the U.S. interest rate rises, U.S. assets become ____ attractive.
So, desired net capital outflow _____. This change in net capital outflow shifts the
__________ curve in the market for foreign-currency exchange to the ______.