Suppose the government changed the tax laws, with the result that people were
encouraged to consume more and save less. Using the loanable funds model, a
consequence would be
a. lower interest rates and lower investment.
b. lower interest rates and greater investment.
c. higher interest rates and lower investment.
d. higher interest rates and higher investment.
Table 29-8
RefetoTable29-8. The required reserve ratio is 12 percent. Which of the following is
true?
a. This banks reserve ratio is 12 percent. Its excess reserves are $0.
b. This banks reserve ratio is 13.3 percent. Its excess reserves are $120.
c. This banks reserve ratio is 15 percent. Its excess reserves are $240.
d. This banks reserve ratio is 10 percent. Its excess reserves are $300.
Other things the same, if the real interest rate in a country falls, domestic residents will
desire to purchase
a. more capital goods and more foreign bonds.
b. more capital goods but fewer foreign bonds.
c. more foreign bonds but fewer capital goods.
d. fewer capital goods and fewer foreign bonds.
Table 2-5
Refer to Table2-5. Table 2-5 shows one set of production possibilities. What is the
opportunity cost of an increase in the production of wheat from 700 bushels to 1300
bushels?
a. 800 bushels of corn
b. 600 bushels of corn
c. 400 bushels of corn
d. 400 bushels of wheat
Suppose that in a country people gain more confidence in the banking system and so
hold relatively less currency and more deposits. As a result, bank reserves will
a. decrease and the money supply will eventually decrease.
b. decrease and the money supply will eventually increase.
c. increase and the money supply will eventually decrease.
d. increase and the money supply will eventually increase.
A decrease in the expected price level shifts short-run aggregate supply to the
a. right, and an increase in the actual price level shifts short-run aggregate supply to the
right.
b. right, and an increase in the actual price level does not shift short-run aggregate
supply.
c. left, and an increase in the actual price level shifts short-run aggregate supply to the
left.
d. left, and an increase in the actual price level does not shift short-run aggregate
supply.
Which of the following statements about U.S. inflation is notcorrect?
a. Low inflation was viewed as a triumph of President Carter’s economic policy.
b. There were long periods in the nineteenth century during which prices fell.
c. The U.S. public has viewed inflation rates of even 7 percent as a major economic
problem.
d. The U.S. inflation rate has varied over time, but international data show even more
variation.
If a country had a trade deficit of $10 billion and then its exports rose by $20 billion
and its imports rose by $10 billion, its net exports would now be
a. $0
b. $10 billion.
c. -$10 billion.
d. -$20 billion.
A movement downward and to the left along a supply curve is called a(n)
a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.
Table 28-2
Labor Data for Aridia
RefetoTable28-2.The labor force of Aridia in 2012 was
a. 1,600.
b. 1,800.
c. 3,000.
d. 3,200.
Figure 23-1.
RefertoFigure23-1. Which of the following pairs correctly identify X and Z?
a. markets for factors of production and markets for goods and services
b. firms and households
c. GDP deflator and CPI
d. flow of dollars and flow of inputs and outputs
A decrease in government spending initially and primarily shifts
a. aggregate demand to the right.
b. aggregate demand to the left.
c. aggregate supply to the right.
d. neither aggregate demand nor aggregate supply.
Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
RefertoTable3-20.What is Brad’s opportunity cost of producing one pound of beef?
a. 5/6 bushel of wheat
b. 6/5 bushels of wheat
c. 3/5 bushels of wheat
d. 5/3 bushels of wheat
Prime Minister Emma Bigshot urges passage of a bill to reduce unemployment benefits
from very generous levels in her country. She also urges her country’s central bank to
raise the rate at which the money supply is increasing. In the long run which, if either,
of these policies will reduce the unemployment rate?
a. both reducing the generosity of unemployment benefits and raising the rate at which
the money supply is increasing
b. reducing the generosity of unemployment benefits but not raising the rate at which
the money supply is increasing
c. raising the rate at which the money supply is increasing, but not reducing the
generosity of unemployment benefits
d. neither reducing the generosity of unemployment benefits nor raising the rate at
which the money supply is increasing
People hold money primarily because it
a. increases in value when there is inflation.
b. serves as a store of value.
c. serves as a medium of exchange.
d. functions as a unit of account.
Duane owns his own real estate company. The Bureau of Labor Statistics counts Duane
as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.
If the inflation rate is zero, then
a. both the nominal interest rate and the real interest rate can fall below zero.
b. the nominal interest rate can fall below zero, but the real interest rate cannot fall
below zero.
c. the real interest rate can fall below zero, but the nominal interest rate cannot fall
below zero.
d. neither the nominal interest rate nor the real interest rate can fall below zero.
If the prices of all goods and services produced in the economy rose while the quantity
of all goods and services stayed the same, which would rise?
a. both real GDP and nominal GDP.
b. real GDP but not nominal GDP.
c. nominal GDP but not real GDP.
d. neither nominal GDP nor real GDP.
High and unexpected inflation has a greater cost
a. for those who borrow than for those who save.
b. for those who hold a little money than for those who hold a lot of money.
c. for those who have fixed nominal wages than for those who have nominal wages that
adjust with inflation.
d. All of the above are correct.
When some dollar amount is automatically corrected for inflation by law or contract,
the amount is said to be indexed for inflation.
a. True
b. False
Mary Beth is risk averse and has $1,000 with which to make a financial investment. She
has three options. Option A is a risk-free government bond that pays 5 percent interest
each year for two years. Option B is a low-risk stock that analysts expect to be worth
about $1,102.50 in two years. Option C is a high-risk stock that is expected to be worth
about $1,200 in four years. Mary Beth should choose
a. option A.
b. option B.
c. option C.
d. either A or B because they are the same to her.
How is net national product (NNP) calculated?
a. Saving is subtracted from the total income of a nation’s citizens.
b. Saving is added to the total income of a nation’s citizens
c. Depreciation losses are subtracted from the total income of a nation’s citizens.
d. Depreciation losses are added to the total income of a nation’s citizens.
Other things the same,if the U.S. price level falls, then
a. U.S. residents want to buy more foreign bonds. The real exchange rate rises.
b. U.S. residents want to buy more foreign bonds. The real exchange rate falls.
c. U.S. residents want to buy fewer foreign bonds. The real exchange rate rises.
d. U.S. residents want to buy fewer foreign bonds. The real exchange rate falls.
Economists agree that at least in the short run disinflation
a. leads to a period of higher unemployment. They also agree that the costs of even
moderate inflation is high.
b. leads to a period of higher unemployment. They disagree about the cost of moderate
inflation.
c. leads to a period of lower unemployment. They also agree that the cost of even
moderate inflation is high.
d. leads to a period of lower unemployment. They disagree about the cost of moderate
inflation.
Which of the following is nota contention of advocates of unions?
a. Unions are a necessary antidote to the market power of the firms that hire workers.
b. In the case of a “company town,” a union may balance the firm’s market power and
protect the workers from being at the mercy of the firm’s owners.
c. The introduction of a union benefits all workers in a firm.
d. Unions are important for helping firms respond efficiently to workers’ concerns.
Eric was laid off two months ago. He has not searched for other work because he is
expecting to be recalled to work. The Bureau of Labor Statistics counts Eric as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. not in the labor force.
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase
in world prices of oil and foodstuffs were affecting the economy.
RefertoTheEconomyin2008.In the short-run the effects of the housing and financial
crises
a. raise both inflation and the unemployment rate.
b. raise the inflation rate and reduce the unemployment rate.
c. reduce the inflation rate and raise the unemployment rate.
d. reduce both the inflation rate and the unemployment rate.
An example of a firm with market power is a
a. delicatessen in New York.
b. cable TV provider in Tulsa.
c. clothing store in Chicago.
d. family farm in Kansas.
If the quality of a good improves while its price remains the same, then the value of a
dollar
a. rises and the cost of living increases.
b. rises and the cost of living decreases.
c. falls and the cost of living increases.
d. falls and the cost of living decreases.
Although monetary policy cannot reduce the natural rate of unemployment, other types
of government policies can.
a. True
b. False
In 2011, the imaginary nation of Maconia had a population of 8,200 and real GDP of
210,500. Maconia had 5% growth in real GDP per person. In 2012 it had a population
of 8,400. To the nearest dollar what was real GDP in Maconia in 2012?
a. 216,815
b. 221,025
c. 226,416
d. None of the above is correct.
From 1980 to 1987, U.S. net capital outflows decreased. According to the
open-economy macroeconomic model, which of the following could have caused this?
a. an increase in the demand for U.S. currency in the market for foreign-currency
exchange
b. a decrease in the demand for U.S. currency in the market for foreign-currency
exchange
c. an increase in the supply of loanable funds
d. a decrease in the supply of loanable funds
With respect to their impact on aggregate demand for the U.S. economy, which of the
following represents the correct ordering of the wealth effect, interest-rate effect, and
exchange-rate effect from mostimportant to leastimportant?
a. wealth effect, exchange-rate effect, interest-rate effect
b. exchange-rate effect, interest-rate effect, wealth effect
c. interest-rate effect, wealth effect, exchange-rate effect
d. interest-rate effect, exchange-rate effect, wealth effect
When two variables move in opposite directions, the curve relating them is
a. upward sloping, and we say the variables are positively related.
b. upward sloping, and we say the variables are negatively related.
c. downward sloping, and we say the variables are positively related.
d. downward sloping, and we say the variables are negatively related.