Figure 3-3
Refer to Figure3-3. If Dina must work 0.25 hour to produce each taco, then her
production possibilities frontier is based on how many hours of work?
a. 40 hours
b. 100 hours
c. 400 hours
d. 1600 hours
A.W. Phillips found a
a. positive relation between unemployment and inflation in the United Kingdom.
b. positive relation between unemployment and inflation in the United States.
c. negative relation between unemployment and inflation in the United States.
d. negative relation between unemployment and inflation in the United Kingdom.
The interest-rate effect is partially explained by the fact that a higher price level reduces
money demand.
a. True
b. False
A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640
euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods
costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has
purchasing-power parity with the U.S.?
a. both Belgium and Japan
b. Belgium but not Japan
c. Japan but not Belgium
d. neither Belgium nor Japan
Which of the following is notincluded in U.S. GDP?
a. additions of newly produced output to inventory
b. production of U.S citizens working in foreign countries.
c. the estimated rental value of owner-occupied housing
d. the value of food purchased from a grocery store to make meals at home without pay
The supply curve for stand up paddle boards
a. shifts when the price of stand up paddle boards changes because the price of stand up
paddle boards is measured on the vertical axis of the graph.
b. shifts when the price of stand up paddle boards changes because the quantity
supplied of stand up paddle boards is measured on the horizontal axis of the graph.
c. does not shift when the price of stand up paddle boards changes because the price of
stand up paddle boards is measured on the vertical axis of the graph.
d. does not shift when the price of stand up paddle boards changes because the price of
stand up paddle boards is measured on the horizontal axis of the graph.
We interpret the term loanablefundto mean the flow of resources available to fund
private investment.
a. True
b. False
Figure27-5. The figure shows a utility function for Dexter.
RefertoFigure27-5. Suppose the vertical distance between the points (0, A) and (0, B)
is 12. If his wealth increased from $1,300 to $1,800, then
a. Dexter’s subjective measure of his wellbeing would increase by less than 12 units.
b. Dexter’s subjective measure of his wellbeing would increase by more than 12 units.
c. Dexter would change from being a risk-averse person into a person who is not risk
averse.
d. Dexter would forgo the insurance he bought when his wealth was $1,300.
If exports are $500, GDP is $8000, government purchases are $1200, imports are $700,
and investment is $800, then consumption is $6200.
a. True
b. False
Table 3-22
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Refer to Table3-22. Suppose Zimbabwe decides to increase its production of
toothbrushes by 10. What is the opportunity cost of this decision?
a. 0.3 hairbrush
b. 3 hairbrushes
c. 30 hairbrushes
d. 100 hairbrushes
Fundamental analysis is
a. the study of the relation between risk and return of stock portfolios.
b. the determination of the allocation of savings between stocks and bonds based on a
person’s degree of risk aversion.
c. the study of a company’s accounting statements and future prospects to determine its
value.
d. a method used to determine how adding stocks to a portfolio will change the risk of
the portfolio.
The aggregate demand and aggregate supply graph has the
a. quantity of output on the horizontal axis. Output is best measured by real GDP.
b. quantity of output on the horizontal axis. Output is best measured by nominal GDP.
c. quantity of output on the vertical axis. Output is best measured by real GDP.
d. quantity of output on the vertical axis. Output is best measured by nominal GDP.
If the price level is higher than expected, firms might raise their production in the short
run if
a. the nominal wage they pay their employees was set based on the expected price level.
b. prices are costly to adjust and they have set their price at some time in the past but
are not ready to change it.
c. they believe that the price of their product has risen relative to the price of other
products, when in fact the rise in the price of their product reflects an increase in the
general price level.
d. All of the above are correct.
Other things the same, if the price level falls, people
a. increase foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange increases.
b. increase foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange decreases.
c. decrease foreign bond purchases, so the supply of dollars in market for
foreign-currency exchange increases.
d. decrease foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange decreases.
The x-coordinate is the
a. first number of an ordered pair and represents the point’s horizontal location.
b. second number of an ordered pair and represents the point’s horizontal location.
c. first number of an ordered pair and represents the point’s vertical location.
d. second number of an ordered pair and represents the point’s vertical location.
What will happen to the equilibrium price and quantity of traditional camera film if
traditional cameras become more expensive, digital cameras become cheaper, the cost
of the resources needed to manufacture traditional film falls, and more firms decide to
manufacture traditional film?
a. Price will fall, and the effect on quantity is ambiguous.
b. Price will rise, and the effect on quantity is ambiguous.
c. Quantity will fall, and the effect on price is ambiguous.
d. Quantity will rise, and the effect on price is ambiguous.
Which of the following would transfer wealth from old to young?
a. Increases in the budget deficit.
b. Decreased building of highways and bridges.
c. More generous education subsidies.
d. Indexation of Social Security benefits to inflation.
Figure 2-18
RelationshipbetweenPriceandRestaurantMeals
RefertoFigure2-18.In the ordered pair (8, 24)
a. the x-coordinate is 8 and the y-coordinate is 24.
b. the x-coordinate is 24 and the y-coordinate is 8.
c. the numbers tell the location of the origin.
d. the 8 represents the price and the 24 represents the number of restaurant meals.
Other things the same, an increase in the amount of capital firms wish to purchase
would initially shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
Consider Mandy’s decision to go to college. If she goes to college, she will spend
$20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not
go to college, she will earn $18,000 working in a store and spend $8,000 on room and
board. Mandy’s cost of going to college is
a. $32,000.
b. $42,000.
c. $50,000.
d. $58,000.
Most economists believe that a cut in tax rates
a. would generally increase government tax revenue.
b. would have no effect on aggregate demand.
c. has a relatively small effect on the aggregate-supply curve.
d. All of the above are correct.
Which markets are represented in the simple circular-flow diagram?
a. markets for goods and services and markets for financial assets
b. markets for factors of production and markets for financial assets
c. markets for goods and services and markets for factors of production
d. markets for goods and services and markets for imports and exports
Figure 3-7
Refer to Figure3-7. If the production possibilities frontiers shown are each for 4 hours
of work, then which of the following combinations of bowls and cups could Bintu and
Juba together notmake in a given 4-hour production period?
a. 3 bowls and 9.5 cups
b. 4.5 bowls and 6 cups
c. 5 bowls and 4 cups
d. 6 bowls and 1 cups
The money supply decreases if
a. households decide to hold relatively more currency and relatively fewer deposits and
banks decide to hold relatively more excess reserves and make fewer loans.
b. households decide to hold relatively more currency and relatively fewer deposits and
banks decide to hold relatively fewer excess reserves and make more loans.
c. households decide to hold relatively less currency and relatively more deposits and
banks decide to hold relatively more excess reserves and make fewer loans.
d. households decide to hold relatively less currency and relatively more deposits and
banks decide to hold relatively less excess reserves and make more loans.
Which of the following statements applies to economics, as well as to other sciences
such as physics?
a. Experiments are considered valid only when they are conducted in a laboratory.
b. Good theories do not need to be tested.
c. Real-world observations often lead to theories.
d. Economics, as well as other sciences, is concerned primarily with abstract concepts.
Buyers and sellers who have no influence on market price are referred to as
a. market pawns.
b. monopolists.
c. price takers.
d. price setters.
Between 1880 and 1886, prices that were
a. lower than expected transferred wealth from creditors to debtors.
b. lower than expected transferred wealth from debtors to creditors.
c. higher than expected transferred wealth from creditors to debtors.
d. higher than expected transferred wealth from debtors to creditors.
Which of the following models imply that a decrease in the money supply reduces
unemployment temporarily but not permanently?
a. both the long-run Phillips curve and the aggregate supply and aggregate demand
model.
b. the aggregate demand and aggregate supply model, but not the long-run Phillips
curve.
c. the long-run Phillips curve, but not the aggregate demand and aggregate supply
model.
d. neither the long-run Phillips curve nor the aggregate supply and aggregate demand
model.
Supply and demand together determine the price and quantity of a good sold in a
market.
a. True
b. False
In the open-economy macroeconomic model, other things the same, when a U.S.
resident imports a foreign good, the demand for dollars in the foreign-currency
exchange market decreases.
a. True
b. False
Lori, who currently owns stock in four companies, has decided to expand her portfolio
by purchasing stock in virtually every company that sells stock. In doing so, Lori will
a. increase the risk of her portfolio.
b. decrease some, but not all, of the risk of her portfolio.
c. decrease all of the risk of her portfolio.
d. leave the risk of her portfolio unchanged from its present level.
Table 4-3
RefertoTable4-3. If these are the only four buyers in the market, then the market
quantity demanded at a price of $1 is
a. 4 units.
b. 7.75 units.
c. 14 units.
d. 31 units.
A common explanation for the behavior of the short-run U.S. Phillips curve in 2009 and
2010 is that, over the previous 20 or so years, the Federal Reserve had
a. established a lot of credibility in its commitment to keep inflation at about 2 percent.
b. established a lot of credibility in its commitment to keep inflation at about 5 percent.
c. failed to establish significant credibility in its announced intent to keep inflation at
about 2 percent.
d. failed to establish significant credibility in its announced intent to keep inflation at
about 5 percent.
Scenario 1-4 You have the afternoon free. You have a choice between going to the
movies with a friend or studying economics for three hours. If you go to the movies,
you will spend $12.00 on a ticket and $4.75 on popcorn. If you choose to study
economics for three hours, you will raise your exam grade by 15 points.
RefertoScenario1-4.What is your opportunity cost of studying economics?
Define each of the symbols and explain the meaning of M×V= P ×Y.
A bank has $1000 in deposits and maintains a 12 percent reserve ratio. Its reserves are
$_____.
What are the sources of the demand for loanable funds? What happens to the quantity
of loanable funds demanded when the interest rate rises?
List three things that shift the short-run Phillips curve to the right.
According to a 1977 amendment to the Federal Reserve Act of 1913, what are the goals
the Fed should promote?
Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010. What is
the CPI in 2010?
The gains from specialization and trade are based on advantage.
Suppose that a decrease in the demand for goods and services pushes the economy into
recession. What happens to the price level? If the government does nothing, what
ensures that the economy still eventually gets back to the natural rate of output?
When tax code changes increase saving incentives, the interest rate willand investment
will .
What does the “invisible hand” refers to?
Economists believe that a little bit of inflation may be a good thing. What are the
potential benefits of inflation?
When the Federal Funds rate is above the Federal Reserve’s target, it will ____ bonds to
_____ the money supply.
Which wellknown economist from the past asserted that “the power of population is
infinitely greater than the power in the earth to produce subsistence for man?”
Define comparative advantage.
Table 28-9
The table below lists the number of people by labor force classification for the country
of Shelbyville.
RefetoTable28-9. What is the unemployment rate?
What is the difference between commodity money and fiat money? Why do people
accept fiat money in trade for goods and services?
What is the difference between money and wealth?
Explain why the interest rate is the opportunity cost of holding currency. What is the
benefit of holding currency?