The primary purpose of measuring the overall level of prices in the economy is to
a. allow for the measurement of GDP.
b. allow consumers to know what kinds of prices to expect in the future.
c. allow for the comparison of dollar figures from different points in time.
d. allow for the comparison of dollar figures from the same point in time.
If the quantity of money demanded is greater than the quantity supplied, then the value
of money rises.
a. True
b. False
National income is defined as
a. the total income of a nation’s permanent residents minus losses from depreciation.
b. the income that households and noncorporate businesses receive.
c. the total income earned by a nation’s permanent residents in the production of goods
and services.
d. the income that households and noncorporate businesses have left after satisfying all
their obligations to the government.
Which is the most accurate statement about the GDP deflator and the consumer price
index?
a. The GDP deflator compares the price of a fixed basket of goods and services to the
price of the basket in the base year, whereas the consumer price index compares the
price of currently produced goods and services to the price of the same goods and
services in the base year.
b. The consumer price index compares the price of a fixed basket of goods and services
to the price of the basket in the base year, whereas the GDP deflator compares the price
of currently produced goods and services to the price of the same goods and services in
the base year.
c. Both the GDP deflator and the consumer price index compare the price of a fixed
basket of goods and services to the price of the basket in the base year.
d. Both the GDP deflator and the consumer price index compare the price of currently
produced goods and services to the price of the same goods and services in the base
year.
Which of the programs below would transfer wealth from the young to the old?
a. Taxes are raised to provide better education.
b. Taxes are raised to improve government infrastructure such as roads and bridges.
c. Taxes are raised to provide more generous Social Security benefits.
d. None of the above transfer wealth form the young to the old.
Amy is working part-time. Tavaris is on temporary layoff. Who is included in the
Bureau of Labor Statistics’ “employed” category?
a. only Amy
b. only Tavaris
c. both Amy and Tavaris
d. neither Amy nor Tavaris
Greg, a U.S. citizen, opens an ice cream store in Bermuda. His expenditures are U.S.
a. foreign portfolio investment that increase U.S. net capital outflow.
b. foreign portfolio investment that decrease U.S. net capital outflow.
c. foreign direct investment that increase U.S. net capital outflow.
d. foreign direct investment that decrease U.S. net capital outflow.
How does U.S. gross domestic product (GDP) differ from U.S. gross national product
(GNP)?
a. GNP = GDP – losses from depreciation
b. GNP = GDP + income earned by U.S. citizens abroad – income that foreign citizens
earned in the U.S.
c. GNP = GDP + transfer payments to households + – indirect sales taxes
d. GNP = GDP – depreciation – retained earnings
Consider the following traders who meet.
Which, if any, pairs of traders has a double coincidence of wants?
a. Bill with Mike
b. Time with Amy
c. Bill with Mike, and Tim with Amy
d. Bill with Tim, and Mike with Amy
Trade allows all countries to achieve greater prosperity.
a. True
b. False
Figure 3-19
Refer to Figure3-19. If Chile and Colombia each spends all of its time producing the
good in which it has a comparative advantage and the countries agree to trade 7 pounds
of coffee for 5 pounds of soybeans, then Chile will consume
a. 7 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds
of coffee and 5 pounds of soybeans.
b. 7 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds
of coffee and 11 pounds of soybeans.
c. 23 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds
of coffee and 5 pounds of soybeans.
d. 23 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds
of coffee and 11 pounds of soybeans.
When a production possibilities frontier is bowed outward, the opportunity cost of the
first good in terms of the second good increases as more of the second good is
produced.
a. True
b. False
Which of the following pairs of values of the consumer price index (CPI) is consistent
with an inflation rate of 10 percent for 2014?
a. CPI in 2014 = 90; CPI in 2015 = 100
b. CPI in 2014 = 102; CPI in 2015 = 112
c. CPI in 2013 = 210; CPI in 2014 = 220
d. CPI in 2013 = 210; CPI in 2014 = 231
Table 4-13
The demand schedule below pertains to sandwiches demanded per week.
RefertoTable4-13.Suppose Harry, Darby, and Jake are the only demanders of
sandwiches. Also suppose the following:
x = 2.
The current price of a sandwich is $3.00.
The market quantity supplied of sandwiches is 4.
The slope of the supply curve is 2.
Then there is currently a
a. shortage of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00.
b. shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.
c. surplus of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00.
d. surplus of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.
Suppose expected inflation and actual inflation are both low, and unemployment is at its
natural rate. If the Fed then pursues an expansionary monetary policy, which of the
following results would be expected in the short run?
a. The short-run Phillips curve would shift to the left.
b. The short-run Phillips curve would shift to the right.
c. The economy would move up and to the left along a given short-run Phillips curve.
d. The economy would move down and to the right along a given short-run Phillips
curve.
Suppose that monetary neutrality and the Fisher effect both hold and the money supply
growth rate has been the same for a long time. Other things the same a higher money
supply growth would be associated with
a. both higher inflation and higher nominal interest rates.
b. a higher inflation rate, but not higher nominal interest rates.
c. a higher nominal interest rate, but not higher inflation.
d. neither a higher inflation rate nor a higher nominal interest rate.
Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30
percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7
percent.
a. True
b. False
Figure 3-2
Brazil’sProductionPossibilitiesFrontier
RefertoFigure3-2.The fact that the line slopes downward reflects the fact that
a. for Brazil, it is more costly to produce peanuts than it is to produce cashews.
b. Brazil will produce more peanuts and fewer cashews as time goes by.
c. Brazil faces a tradeoff between producing peanuts and producing cashews.
d. Brazil should specialize in producing cashews.
Suppose the market for loanable funds is in equilibrium. What would happen in the
market for loanable funds, other things the same, if the Congress and President
increased the maximum contribution limits to 401(k) and 403(b) tax- deferred
retirement accounts?
a. the interest rate and quantity of loanable funds would increase
b. the interest rate and quantity of loanable funds would decrease.
c. the interest rate would increase and the quantity of loanable funds would decrease.
d. the interest rate would decrease and the quantity of loanable funds would increase.
Which of the following is notcorrect?
a. There is a greater reduction in risk by increasing the number of stocks in a portfolio
from 1 to 10, than by increasing it from 100 to 120 stocks.
b. The historical rate of return on stocks has been about 5 percentage points higher than
the historical rate of return on bonds.
c. Stock in an industry that is very sensitive to economic conditions is likely to have a
higher average return than stock in an industry that is not so sensitive to economic
conditions.
d. If you had information about a corporation that no one else had, you could earn a
very high rate of return. This contradicts the efficient market hypothesis.
Which of the following would we notexpect if government policy moved the economy
up along a given short-run Phillips curve?
a. Teresa reads in the newspaper that the central bank recently raised the money supply.
b. Jackie gets fewer job offers.
c. Miguel makes larger increases in the prices at his health food store.
d. Julie’s nominal wage increase is larger.
You put money into an account and earn a real interest rate of 5 percent. Inflation is 2
percent, and your marginal tax rate is 35 percent. What is your after-tax real rate of
interest?
a. 5.25 percent
b. 3.05 percent
c. 2.55 percent
d. 1.25 percent
A policy that raised the natural rate of unemployment would shift
a. both the short-run and the long-run Phillips curves to the right.
b. the short-run Phillips curve right but leave the long-run Phillips curve unchanged.
c. the long-run Phillips curve right but leave the short-run Phillips curve unchanged.
d. neither the long-run Phillips curve nor the short-run Phillips curve right.
If velocity and output were nearly constant, then
a. the inflation rate would be much higher than the money supply growth rate.
b. the inflation rate would be about the same as the money supply growth rate.
c. the inflation rate would be much lower than the money supply growth rate.
d. any of the above would be possible.
A likely effect of government policies that redistribute income and wealth from the
wealthy to the poor is that those policies
a. enhance equality.
b. reduce efficiency.
c. reduce the reward for working hard.
d. All of the above are correct.
If taxes rise, then aggregate demand shifts
a. right, making unemployment higher than otherwise.
b. right, making unemployment lower than otherwise.
c. left, making unemployment higher than otherwise.
d. left, making unemployment lower than otherwise.
The following table contains a demand schedule for a good.
If the law of demand applies to this good, then A could be
a. 0.
b. 100.
c. 200.
d. 400.
Figure35-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and
two aggregate-demand (AD) curves. On the right-hand diagram, U represents the
unemployment rate.
RefertoFigure35-1.The curve that is depicted on the righthand graph offers
policymakers a “menu” of combinations
a. that applies both in the short run and in the long run.
b. that is relevant to choices involving fiscal policy, but not to choices involving
monetary policy.
c. of inflation and unemployment.
d. All of the above are correct.
A 2009 Chevrolet model has more horsepower than the 2008 version and is included in
the BLS basket of goods. BLS attempts to account for this change in the market basket
by
a. dropping the good from the basket.
b. substituting in a different vehicle with the same horsepower as the 2008 model.
c. adjusting the share of the market basket allocated to transportation.
d. adjusting the price of the good to account for the quality change.
If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same
amount of goods and services as
a. $2.67 purchases today.
b. $37.50 purchases today.
c. $39.00 purchases today.
d. $104.00 purchases today.
What is the future value of $375 at an interest rate of 3 percent one year from today?
a. $371.75
b. $386.25
c. $393.33
d. None of the above are correct to the nearest cent.
A firm produces construction equipment, some of which it exports. Which of the
following effects of an increase in the government budget deficit would likely reduce
the quantity of equipment it sells?
a. the change in the interest rate and the change in the exchange rate
b. the change in the interest rate but not the change in the exchange rate
c. the change in the exchange rate but not the change in the interest rate
d. neither the change in the interest rate nor the change in the exchange rate
Consumer price index = = 100.
a. True
b. False
Not all unemployment ends with the job seeker finding a job.
a. True
b. False
Ralph Nader’s book UnsafeatAnySpeedcaused Congress to require
a. safety glass in all new cars.
b. seat belts in all new cars.
c. air bags in all new cars.
d. stricter drunk driving laws in all states.