Figure 2-8
Refer to Figure2-8. For this economy, as more and more hammers are produced, the
opportunity cost of an additional hammer produced, in terms of nails,
a. remains constant.
b. increases.
c. decreases.
d. This answer cannot be determined from the graph.
Consternation Corporation has an agreement with its workers to index completely the
wage of its employees using the CPI. Consternation Corporation currently pays its
production line workers $8.00 an hour and is scheduled to index their wages today. If
the CPI is currently 160 and was 128 a year ago, the firm should increase the hourly
wages of its workers by
a. $0.25.
b. $1.60.
c. $2.00.
d. $2.56.
In the economy of Talikastan in 2015, consumption was $700, exports were $200,
government purchases were $300, imports were $150, and investment was $400. What
was Talikastan’s GDP in 2015?
a. $1350
b. $1450
c. $1050
d. $1750
Suppose one year ago the price index was 120 and Maria purchased $20,000 worth of
bonds. One year later the price index is 126. Maria redeems her bonds for $22,700 and
is in a 40 percent tax bracket. What is Maria’s real after-tax rate of interest to the nearest
tenth of a percent?
a. 5.1 percent
b. 3.1 percent
c. 2.1 percent
d. 2.4 percent
The Bureau of Labor Statistics is part of the U.S. Department of
a. the Treasury.
b. Commerce.
c. Labor.
d. the Interior.
A decrease in taxes on interest income would increase the interest rate.
a. True
b. False
You are planning a graduation trip to Mexico. Other things the same, if the dollar
appreciates relative to the peso, then
a. the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars.
b. the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars.
c. the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.
d. the dollar buys more pesos. Your hotel room in Mexico will require more dollars.
An economist claims that changes in information technology and unemployment
insurance have reduced unemployment. Which of these changes affect frictional
unemployment?
a. both the changes in information technology and unemployment insurance
b. only the changes in information technology
c. only the changes in unemployment insurance
d. neither the changes in information technology nor the changes in unemployment
insurance
Other things the same, an increase in population growth
a. increases capital per worker. Further, there is some evidence that a higher population
growth rate may increase the pace of technological progress.
b. increases capital per worker. However, there is some evidence that a higher
population growth rate may decrease the pace of technological progress.
c. decreases capital per worker. Further, there is some evidence that a higher population
growth rate may decrease the pace of technological progress.
d. decreases capital per worker. However, there is some evidence that a higher
population growth rate may increase the pace of technological progress.
Wealth is redistributed from creditors to debtors when inflation is
a. high, whether it is expected or not.
b. low, whether it is expected or not.
c. unexpectedly high.
d. unexpectedly low.
Figure 2-11
RefertoFigure2-11.The shift of the production possibilities frontier from A to B
illustrates
a. simultaneous technological advances in the book and DVD industries.
b. a reallocation of resources away from the production of DVDs and toward the
production of books.
c. economic growth.
d. All of the above are correct.
In the open-economy macroeconomic model, equilibrium in the market for
foreign-currency exchange is determined by the equality between the supply of dollars
which comes from
a. U.S. national saving and the demand for dollars for U.S. net exports.
b. U.S. net capital outflow and the demand for dollars for U.S. net exports.
c. domestic investment and the demand for U.S. net exports.
d. foreign demand for U.S. goods and services and U.S. demand for foreign goods and
services.
Public service announcements, mandatory health warnings on cigarette packages, and
the prohibition of cigarette advertising on television are all policies aimed at shifting the
demand curve for cigarettes to the right.
a. True
b. False
Relative-price variability
a. rises with inflation, leading to an improved allocation of resources.
b. rises with inflation, leading to a misallocation of resources.
c. falls with inflation, leading to an improved allocation of resources.
d. falls with inflation, leading to a misallocation of resources.
Additions to inventory subtract from GDP, and when the goods in inventory are sold,
the reductions in inventory add to GDP.
a. True
b. False
Table 24-1
The table below lists annual consumer price index and inflation rates for a country over
the period 2005-2010. Assume the year 2005 is used as the base year.
RefertoTable24-1. What belongs in space D?
a. 12%
b. 154
c. 40%
d. 15%
Table31-2
RefertoTable31-2. In real terms, U.S. goods are more expensive than goods in which
country(ies)?
a. Britain
b. Germany and Japan
c. Japan
d. Germany and Venezuela
Suppose that interest rates unexpectedly rise and that FineLine Corporation announces
that revenues from last quarter were down but not as much as the public had anticipated
they would be down. According to the efficient markets hypothesis, which of the these
things make the price of FineLine Corporation Stock fall?
a. both the interest rate rising and the revenue announcement
b. neither the interest rate rising nor the revenue announcement
c. only the interest rate rising
d. only the revenue announcement
Which of the following is correct?
a. A bank’s deposits at the Federal Reserve counts as part of the bank’s reserves. The
Federal Reserve pays interest on these deposits.
b. A bank’s deposits at the Federal Reserve counts as part of the bank’s reserves. The
Federal Reserve does not pay interest on these deposits.
c. A bank’s deposits at the Federal Reserve does not count as part of the bank’s reserves.
The Federal Reserve pays interest on these deposits.
d. A bank’s deposits at the Federal Reserve does not count as part of the bank’s reserves.
The Federal Reserve does not pay interest on these deposits.
The dictionary defines equilibrium as a situation in which forces
a. are in balance.
b. are the same.
c. clash.
d. remain constant.
Other things the same, if the government decreases transfer payments, then
a. both the interest rate and the equilibrium quantity of loanable funds fall.
b. both the interest rate and the equilibrium quantity of loanable funds rise.
c. the interest rate rises and the equilibrium quantity of loanable funds falls.
d. the interest rate falls and the equilibrium quantity of loanable funds rises.
Other things the same, the aggregate quantity of goods demanded in the U.S. increases
if
a. real wealth rises.
b. the interest rate rises.
c. the dollar appreciates.
d. All of the above are correct.
If in a closed economy Y = $11 trillion, which of the following combinations would be
consistent with national saving of $3 trillion?
a. C= $8 trillion, G= $3 trillion
b. C= $13 trillion, G= -$1 trillion
c. C= $9 trillion, G= $5 trillion
d. C= $7 trillion, G= $1 trillion
According to the principle of monetary neutrality, a decrease in the money supply will
not change
a. nominal GDP.
b. the price level.
c. unemployment.
d. All of the above are correct.
Suppose the number of buyers in a market increases and a technological advancement
occurs also. What would we expect to happen in the market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
Which of the following is adverse selection?
a. the risk associated with selecting stocks in only a few specific companies
b. the risk that a person will become overconfident in his ability to select stocks
c. a high-risk person being more likely to apply for insurance
d. after obtaining insurance a person having less incentive to be careful
When the Fed increases the money supply, we expect
a. interest rates and stock prices to rise.
b. interest rates and stock prices to fall.
c. interest rates to rise and stock prices to fall.
d. interest rates to fall and stock prices to rise.
According to the theory of liquidity preference, if output decreases
a. people want to hold more money. This response is shown as a movement along the
money demand curve.
b. people want to hold more money. This response is shown as a shift of the money
demand curve.
c. people want to hold less money. This response is shown as a movement along the
money demand curve.
d. people want to hold less money. This response is shown as a shift of the money
demand curve.
Some people who are employed or who are not making serious effort to find
employment will report themselves as unemployed. Some people who want to find
work will be counted as out of the labor force.
a. Both the first and the second fact tend to make the reported unemployment rate lower
than otherwise.
b. Both the first and the second fact tend to make the reported unemployment rate
higher than otherwise.
c. The first fact tends to make the reported unemployment rate higher than otherwise,
while the second fact tends to make the reported unemployment rate lower than
otherwise.
d. The first fact tends to make the reported unemployment rate lower than otherwise,
while the second fact tends to make the reported unemployment rate higher than
otherwise.
Scenario 26-2. Assume the following information for an imaginary, closed economy.
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion;
and taxes = $0.9 trillion.
RefertoScenario26-2.For this economy, investment amounts to
a. $0.4 trillion.
b. $2.1 trillion.
c. $1.7 trillion.
d. $1.2 trillion.
Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer’s
basket consists of 2 pillows and 15 hotdogs.
RefertoTable24-6. If the base year is 2009, then the economy’s inflation rate in 2010 is
a. 20 percent.
b. 25 percent.
c. 30 percent.
d. 120 percent.
The study of how society manages its scarce resources is most closely associated with
which field of study?
a. environmental studies
b. economics
c. management
d. accounting
Some adults who were not working are included in the Bureau of Labor Statistics’
“employed” category.
a. True
b. False
Which group within the Federal Reserve System meets to discuss changes in the
economy and determine monetary policy?
a. the Board of Governors
b. the FOMC
c. the regional Federal Reserve Bank presidents
d. the Central Bank Policy Commission