When a bank loans out $1,000, the money supply
a. does not change.
b. decreases.
c. increases.
d. may do any of the above.
Figure 33-4
RefertoFigure33-4. In the short run, a favorable shift in aggregate supply would move
the economy from
a. A to B.
b. B to C.
c. C to D.
d. D to A.
If consumption expenditures fall, then in the short run
a. inflation and unemployment rise.
b. inflation rises and unemployment falls.
c. inflation falls and unemployment rises.
d. inflation and unemployment fall.
Consider Frank’s decision to go to college. If he goes to college, he will spend $21,000
on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to
college, he will earn $16,000 working in a store and spend $7,200 on room and board.
Frank’s cost of going to college is
a. $33,800.
b. $42,600.
c. $49,800.
d. $57,000.
Figure 33-4
RefertoFigure33-4. If the economy starts at A and there is a fall in aggregate demand,
the economy moves
a. back to A in the long run.
b. to B in the long run.
c. to C in the long run.
d. to D in the long run.
Trade allows each person to specialize in the activities he or she does best, thus
increasing each individual’s productivity.
a. True
b. False
Which of the following would not result from all countries specializing according to the
principle of comparative advantage?
a. The size of the economic pie would increase.
b. Worldwide production of goods and services would increase.
c. The well-being of citizens in each country would be enhanced.
d. Each country’s production possibilities frontier would shift inward.
According to the classical dichotomy, when the money supply doubles which of the
following doubles?
a. the price level and nominal GDP
b. the price level and real GDP
c. only real GDP
d. only the price level
During recessions, banks typically choose to hold more excess reserves relative to their
deposits. This action
a. increases the money multiplier and increases the money supply.
b. decreases the money multiplier and decreases the money supply.
c. does not change the money multiplier, but increases the money supply.
d. does not change the money multiplier, but decreases the money supply.
Journey Motorcycles produced 100 motorcycles using 50 workers who each worked 8
hours a day. Journey’s productivity was 1/4.
a. True
b. False
Wages in excess of their equilibrium level help explain
a. frictional but not structural unemployment.
b. structural but not frictional unemployment.
c. both frictional and structural unemployment.
d. neither frictional nor structural unemployment.
Holding the nonprice determinants of supply constant, a change in price would
a. result in either a decrease in supply or an increase in supply.
b. result in a movement along a stationary supply curve.
c. result in a shift of demand.
d. have no effect on the quantity supplied.
A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the
revenues to buy leather from the U.S. These transactions
a. increase both U.S. net exports and U.S. net capital outflow.
b. decrease both U.S. net exports and U.S. net capital outflow.
c. increase U.S. net exports and do not affect U.S. net capital outflow.
d. None of the above is correct.
In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county
restored the courthouse for about $2.4 million. A price index for nonresidential
construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these
numbers, the hospital cost about
a. $3.6 million in 2000 dollars, which is less than the cost of the courthouse restoration
in 2000 dollars.
b. $3.6 million in 2000 dollars, which is more than the cost of the courthouse
restoration in 2000 dollars.
c. $4.1 million in 2000 dollars, which is less than the cost of the courthouse restoration
in 2000 dollars.
d. $4.1 million in 2000 dollars, which is more than the cost of the courthouse
restoration in 2000 dollars.
An open-market sale
a. increases the number of dollars and the number of bonds in the hands of the public.
b. increases the number of dollars in the hands of the public and decreases the number
of bonds in the hands of the public.
c. decreases the number of dollars and the number of bonds in the hands of the public.
d. decreases the number of dollars in the hands of the public and increases the number
of bonds in the hands of the public.
Figure 3-16
RefertoFigure3-16.Hosne has an absolute advantage in the production of
a. purses and Merve has an absolute advantage in the production of wallets.
b. wallets and Merve has an absolute advantage in the production of purses.
c. both goods and Merve has an absolute advantage in the production of neither good.
d. neither good and Merve has an absolute advantage in the production of both goods.
Other things the same, when a Canadian company imports bicycles from the U.S., the
open-economy macroeconomic model treats this transaction as part of the demand for
dollars in the U.S. foreign-currency exchange market.
a. True
b. False
In June 2009 the Bureau of Labor Statistics reported a U.S. foreign-born population of
35.3 million. Of these, 22.7 million were employed and 1.4 million were unemployed.
Based on these numbers what were the unemployment rate and the labor-force
participation rate of the foreign-born U.S. population?
a. 1.4/35.3 and 22.7/35.3
b. 1.4/35.3 and 24.1/35.3
c. 1.4/24.1 and 22.7/24.1
d. None of the above is correct.
Figure34-4.On the figure, MSrepresents money supply and MDrepresents money
demand.
RefertoFigure34-4. Suppose the current equilibrium interest rate is 1. Which of the
following events would cause the equilibrium interest rate to increase?
a. The Federal Reserve increases the money supply.
b. Money demand increases.
c. The price level decreases.
d. All of the above are correct.
Which of the following demonstrates the law of demand?
a. After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did
before his raise.
b. Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things
equal.
c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things
equal.
d. Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls
to $0.50 per Milky Way.
If inflation were reduced, then it is
a. likely that real incomes would rise more rapidly and labor markets would be more
flexible.
b. likely that real incomes would rise more rapidly but unlikely that labor markets
would be more flexible.
c. likely that labor markets would be more flexible but unlikely that real incomes would
rise more rapidly.
d. unlikely that real incomes would rise more rapidly and unlikely that labor markets
would be more flexible.
RefertoFigure2-10,Panel(a)andPanel(b).Which of the following is nota result of the
shift of the economy’s production possibilities frontier from Panel (a) to Panel (b)?
a. The tradeoff between the production of tractors and sofas changes.
b. Production of 2 tractors and 10 sofas becomes efficient.
c. Production of 6 tractors and 14 sofas becomes possible.
d. The opportunity cost of a sofa is higher at all levels of sofa production.
Table 28-1
Sample Population
RefetoTable28-1.How many in the sample are in the labor force?
a. 11
b. 10
c. 9
d. 8
In response to the deep economic downturn in the US in 2008 and 2009, the US
a. reduced taxes.
b. increased government spending.
c. increased the supply of money.
d. All of the above are correct.
All of the following are examples of a nondurable good except
a. a pencil.
b. one gallon of gasoline.
c. a queen-size bed.
d. a pair of shoes.
Efficiency-wage theory suggests that paying
a. low wages might be profitable because they raise the efficiency of a firm’s workers.
b. low wages might be profitable because they lower the efficiency of a firm’s workers.
c. high wages might be profitable because they raise the efficiency of a firm’s workers.
d. high wages might be profitable because they lower the efficiency of a firm’s workers.
If for some reason Americans desired to increase their purchases of foreign assets, then
other things the same
a. both the real exchange rate and the quantity of dollars exchanged in the market for
foreign-currency exchange would fall.
b. both the real exchange rate and the quantity of dollars exchanged in the market for
foreign-currency would rise.
c. the real exchange rate would rise and the quantity of dollars exchanged in the market
for foreign-currency would fall.
d. the real exchange rate would fall and the quantity of dollars exchanged in the market
for foreign-currency would rise.
Which of the following events must result in a lower price in the market for Snickers?
a. Demand for Snickers increases, and supply of Snickers decreases.
b. Demand for Snickers and supply of Snickers both decrease.
c. Demand for Snickers decreases, and supply of Snickers increases.
d. Demand for Snickers and supply of Snickers both increase
Popeye produces 20 cans of spinach in 8 hours. Wimpy produces 15 hamburgers in 10
hours. If each hamburger trades for 1.5 cans of spinach, then
a. Popeye’s production and productivity are greater than Wimpy’s.
b. Popeye’s production is greater than Wimpy’s, but his productivity is less.
c. Wimpy’s production and productivity are greater than Popeye’s.
d. Wimpy’s production is greater than Popeye’s, but his productivity is less.
The theory of liquidity preference illustrates the principle that
a. monetary policy can be described either in terms of the money supply or in terms of
the interest rate.
b. monetary policy can be described either in terms of the exchange rate or the interest
rate.
c. monetary policy must be described in terms of the money supply.
d. monetary policy must be described in terms of the interest rate.
Which of the following would both shift aggregate demand right?
a. the price level decreases and government expenditures increase.
b. the price level decreases and the government repeals an investment tax credit.
c. taxes decrease and government expenditures increase.
d. None of the above are correct.
Other things the same, which bond would you expect to pay the lowest interest rate?
a. a bond issued by a state with a very good credit rating
b. a bond issued by the U.S. government
c. a bond issued by a fairly new company doing genetic research
d. a bond issued by Nabisco
If nominal GDP is $12 trillion and real GDP is $10 trillion, then the GDP deflator is
a. 83.33, and this indicates that the price level has decreased by 16.67 percent since the
base year.
b. 83.33, and this indicates that the price level has increased by 83.33 percent since the
base year.
c. 120, and this indicates that the price level has increased by 20 percent since the base
year.
d. 120, and this indicates that the price level has increased by 120 percent since the base
year.
The market for insurance is an example of diversification.
a. True
b. False
Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase
causes inventors to look at alternative sources of fuel for internal-combustion engines.
A hydrogen-powered engine is developed which is cheaper to operate than gasoline
engines. Which problems in the construction of the CPI does this situation represent?
a. substitution bias and introduction of new goods
b. introduction of new goods and unmeasured quality change
c. substitution bias and unmeasured quality change
d. income bias and substitution bias