The Federal Open Market Committee meets about
a. every six days.
b. every six weeks.
c. every six months.
d. every sixteen months.
When Mario’s income decreases, he buys more pasta. For Mario, pasta is a normal
good.
a. True
b. False
Macroeconomic statistics tell us about a particular household, firm, or market.
a. True
b. False
According to classical macroeconomic theory, changes in the money supply affect
a. variables measured in terms of money and variables measured in terms of quantities
or relative prices
b. variables measured in terms of money but not variables measured in terms of
quantities or relative prices
c. variables measured in terms of quantities or relative prices, but not variables
measured in terms of money
d. neither variables measured in terms of money nor variables measured in terms of
quantities or relative prices
Table 4-9
RefertoTable4-9.Which combination would produce an increase in equilibrium price
and an indeterminate change in equilibrium quantity?
a. A
b. B
c. C
d. D
Credit cards are a medium of exchange.
a. True
b. False
In a market economy, the real, or inflation-adjusted, price of a resource measures its
a. contribution to revenue.
b. relative scarcity.
c. productivity.
d. contribution to efficiency.
An adverse supply shock causes output to
a. rise. To counter this a central bank would increase the money supply.
b. rise. To counter this a central bank would decrease the money supply.
c. fall. To counter this a central bank would increase the money supply.
d. fall. To counter this a central bank would decrease the money supply.
Which of the following is the correct way to compute the future value of $1 put into an
account that earns 5 percent interest for 16 years?
a. $1(1 + .05)16
b. $1(1 + .05 × 16) × 16
c. $1(1 + .05 × 16)
d. $1(1 + 16/.05)16
A country has GDP of $700 billion, consumption of $450 billion, government
expenditures of $100 billion, and domestic investment of $200 billion. What is its
supply of loanable funds?
a. $350 billion
b. $250 billion
c. $200 billion
d. $150 billion
Consumption consists of spending by households on goods and services, with the
exception of
a. purchases of intangible services.
b. purchases of durable goods.
c. purchases of new houses.
d. spending on education.
The price of milk increases dramatically, causing a 0.5 percent increase in the CPI. The
price increase will most likely cause the GDP deflator to increase by
a. more than 0.5 percent.
b. less than 0.5 percent.
c. 0.5 percent.
d. None of the above is correct; this particular price increase will not affect the GDP
deflator.
Figure 3-18
RefertoFigure3-18.Bintu has a comparative advantage in the production of
a. bowls and Juba has a comparative advantage in the production of cups.
b. cups and Juba has a comparative advantage in the production of bowls.
c. both goods and Juba has a comparative advantage in the production of neither good.
d. neither good and Juba has a comparative advantage in the production of both goods.
Satchel loses his job and immediately begins looking for another. Other things the
same,the unemployment rate
a. increases, and the labor-force participation rate decreases.
b. and the labor-force participation rate both increase.
c. increases, and the labor-force participation rate is unaffected.
d. is unaffected, and the labor-force participation rate decreases.
The reserve requirement is 12 percent. Lucy deposits $600 into a bank. By how much
do excess reserves change?
a. $600
b. $528
c. $72
d. $12
According to a 2009 article in TheEconomist, the multiplier effect and crowding-out
effect would exactly offset each other when the economy is
a. operating at full capacity.
b. in recession.
c. experiencing zero inflation.
d. experiencing high rates of inflation.
According to economists, “money” means the same thing as “wealth”.
a. True
b. False
If the U.S. government reports that GDP in the third quarter was $16 trillion at an
annual rate, then the amount of income and expenditure during quarter three was $4
trillion.
a. True
b. False
If saving is greater than domestic investment, then
a. there is a trade deficit and Y > C + I + G.
b. there is a trade deficit and Y < C + I + G.
c. there is a trade surplus and Y > C + I + G.
d. there is a trade surplus and Y < C + I + G.
Which of the following events could explain an increase in interest rates together with a
decrease in investment?
a. The government budget went from surplus to deficit.
b. The government instituted an investment tax credit.
c. The government reduced the tax rate on savings.
d. None of the above is correct.
If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US
dollars costs
a. 125 Egyptian pounds
b. 50 Egyptian pounds
c. 5 Egyptian pounds
d. None of the above is correct.
The idea that the long-run Phillips curve is
a. vertical stems from the analysis of Samuelson and Solow.
b. vertical stems from the analysis of Friedman and Phelps.
c. vertical was disproved by the experiment that monetary and fiscal policymakers
inadvertently created in the 1970s.
d. downward-sloping can be correct if unemployment responds very quickly to
unexpected inflation.
Measuring the amount of unemployment in the economy is a straightforward task.
a. True
b. False
Figure 2-23
RefertoFigure2-23. The opportunity cost of moving from point A to point D is 10
dishwashers.
a. True
b. False
The line that relates the price of a good and the quantity supplied of that good is called
the supply
a. schedule, and it usually slopes upward.
b. schedule, and it usually slopes downward.
c. curve, and it usually slopes upward.
d. curve, and it usually slopes downward.
Which of the following statements is incorrect for an open economy?
a. A country can have a trade deficit, trade surplus, or balanced trade.
b. A country that has a trade deficit has positive net capital outflow.
c. Net exports must equal net capital outflow.
d. National saving equals domestic investment plus net capital outflow.
If purchasing-power parity holds, when a country’s central bank increases the money
supply, its
a. price level rises and its currency appreciates relative to other currencies in the world.
b. price level rises and its currency depreciates relative to other currencies in the world.
c. price level falls and its currency appreciates relative to other currencies in the world.
d. price level falls and its currency depreciates relative to other currencies in the world.
When constructing a production possibilities frontier, which of the following
assumptions is not made?
a. The economy produces only two goods or two types of goods.
b. Firms produce goods using factors of production.
c. The technology available to firms is given.
d. The quantities of the factors of production that are available are increasing over the
relevant time period.
An increase in the price of a substitute good will shift the demand curve for a good to
the right.
a. True
b. False
The largest sector in the consumer price index market basket is food and beverage
purchases.
a. True
b. False
According to liquidity preference theory, if there were a surplus of money, then
a. the interest rate would be above equilibrium and the quantity of money demanded
would be too large for equilibrium.
b. the interest rate would be above equilibrium and the quantity of money demanded
would be too small for equilibrium.
c. the interest rate would be below equilibrium and the quantity of money demanded
would be too small for equilibrium.
d. the interest rate would be below equilibrium and the quantity of money demanded
would be too large for equilibrium.
In a certain economy, when income is $400, consumer spending is $325. The value of
the multiplier for this economy is 3.33. It follows that, when income is $450, consumer
spending is
a. $360. For this economy, an initial increase of $50 in consumer spending translates
into a $266.67 increase in aggregate demand.
b. $360. For this economy, an initial increase of $50 in consumer spending translates
into a $166.50 increase in aggregate demand.
c. $341.67. For this economy, an initial increase of $50 in consumer spending translates
into a $266.67 increase in aggregate demand.
d. $341.67. For this economy, an initial increase of $50 in consumer spending translates
into a $166.25 increase in aggregate demand.