Food and clothing tend to have
a. small income elasticities because consumers, regardless of their incomes, choose to
buy relatively constant quantities of these goods.
b. small income elasticities because consumers buy proportionately more of both goods
at higher income levels than they buy at low income levels.
c. large income elasticities because they are necessities.
d. large income elasticities because they are relatively inexpensive.
Net exports measures the difference between a country’s
a. income and expenditures.
b. sale of goods and services abroad and purchase of foreign goods and services.
c. sale of domestic assets abroad and purchase of foreign assets.
d. All of the above are correct.
Which of the following is correct?
a. If the Fed purchases bonds in the open market, then the money supply curve shifts
right. A change in the price level does not shift the money supply curve.
b. If the Fed sells bonds in the open market, then the money supply curve shifts right. A
change in the price level does not shift the money supply curve.
c. If the Fed purchases bonds, then the money supply curve shifts right. An increase in
the price level shifts the money supply curve right.
d. If the Fed sells bonds, then the money supply curve shifts right. A decrease in the
price level shifts the money supply curve right.
When a binding price floor is imposed on a market to benefit sellers,
a. no sellers actually benefit.
b. some sellers benefit, but no sellers are harmed.
c. some sellers benefit, and some sellers are harmed.
d. all sellers benefit.
If inflation expectations rise, the short-run Phillips curve shifts
a. right, so that at any unemployment rate inflation is higher in the short run than
before.
b. left, so that at any unemployment rate inflation is higher in the short run the before.
c. right, so that at any unemployment rate inflation is lower in the short run than before.
d. left, so that at any unemployment rate inflation is lower in the short run than before.
If the Fed conducts open-market purchases, the money supply
a. increases and aggregate demand shifts right.
b. increases and aggregate demand shifts left.
c. decreases and aggregate demand shifts right.
d. decreases and aggregate demand shifts left.
Bolivia buys railroad engines from a U.S. firm and pays for them with Bolivianos
(Bolivian currency). By itself, this exchange
a. increases both U.S. net exports and U.S. net capital outflow.
b. decreases both U.S. net exports and U.S. net capital outflow.
c. increases U.S. net exports and does not affect U.S. net capital outflow.
d. None of the above is correct.
From 2000-2006 net capital outflow as a percent of GDP became a
a. larger positive number.
b. smaller positive number.
c. larger negative number.
d. smaller negative number
In the mid-1970s the price of oil rose dramatically. This
a. shifted aggregate supply left.
b. caused U.S. prices to fall.
c. was the consequence of OPEC increasing oil production.
d. All of the above are correct.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to
increase by
a. $20.
b. $200.
c. $300.
d. $500.
A macroeconomist – as opposed to a microeconomist – would study
a. the effects of rent control on housing in New York City.
b. the effects of foreign competition on the US auto industry.
c. the effects of borrowing by the federal government.
d. the effects of raising the gasoline tax on transit ridership.
When tires are taxed and sellers of tires are required to pay the tax to the government,
a. the quantity of tires bought and sold in the market is reduced.
b. the price paid by buyers of tires decreases.
c. the demand for tires decreases.
d. there is a movement downward and to the right along the demand curve for tires.
Which of the following is included in both M1 and M2?
a. savings deposits
b. demand deposits
c. small time deposits
d. money market mutual funds
Other things the same, as the stocks of a greater number of corporations are held in a
portfolio,
a. risk increases at an increasing rate.
b. risk increases at a decreasing rate.
c. risk decreases at an increasing rate.
d. risk decreases at a decreasing rate.
Figure 2-15
Relationship between Price and Cups of Coffee
Refer to Figure 2-15. The slope of the line containing points A and B is
a. -1/2.
b. -2.
c. 1/2.
d. 2.
Which of the following is not correct?
a. The higher average return on stocks than on bonds comes at the price of higher risk.
b. Risk-averse persons will take the risks involved in holding stocks if the average
return is high enough to compensate for the risk.
c. Insurance markets reduce risk, but not by diversification.
d. Risk can be reduced by placing a large number of small bets, rather than a small
number of large bets.
In a certain economy, toys and greeting cards are produced, and the economy currently
operates on its production possibilities frontier. Which of the following events would
allow the economy to produce more toys and more greeting cards, relative to the
quantities of those goods that are being produced now?
a. The economy experiences economic growth.
b. There is a technological advance in the toy industry, but the greeting card industry
experiences no such advance.
c. There is a technological advance in the greeting card industry, but the toy industry
experiences no such advance.
d. All of the above are correct.
Figure 8-11
Refer to Figure 8-11. The price labeled as P3 on the vertical axis represents the price
a. received by sellers before the tax is imposed.
b. received by sellers after the tax is imposed.
c. paid by buyers before the tax is imposed.
d. paid by buyers after the tax is imposed.
A creditor of a corporation holds
a. bonds sold by the corporation. If the corporation experiences financial difficulties
stock holders are paid before bond holders.
b. bonds sold by the corporation. If the corporation experiences financial difficulties
bond holders are paid before stock holders.
c. stocks sold by the corporation. If the corporation experiences financial difficulties
stock holders are paid before bond holders.
d. stocks sold by the corporation. If the corporation experiences financial difficulties
bond holders are paid before stock holders.
Table 7-8
The only four producers in a market have the following costs:
Refer to Table 7-8. If Evan, Selena, and Angie sell the good, and the resulting producer
surplus is $300, then the price must have been
a. $200.
b. $300.
c. $450.
d. $600.
In the graph of the money market, the money supply curve is
a. vertical. It shifts rightward if the Fed buys bonds.
b. vertical. It shifts rightward if the Fed sells bonds.
c. upward sloping. It shifts rightward if the Fed buys bonds.
d. upward sloping. It shifts rightward if the Fed sells bonds.
Based on the quantity equation, if M = 3,000, P = 2, and Y = 4,500, then V =
a. 1.33.
b. 1.5.
c. 3.
d. 6.75.
Figure 9-5
Refer to Figure 9-5. With trade, producer surplus is
a. $80.
b. $150.
c. $210.
d. $245.
You put $75 in the bank one year ago and forgot about it. The bank sends you a notice
that you now have $81 in your account. What interest rate did you earn?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
Friedman and Phelps argued that
a. if peoples’ inflation expectations were fixed, then an increase in the money supply
growth rate could not change output in the short or long run.
b. if peoples’ inflation expectations were fixed, then a decrease in the money supply
growth rate could raise output and unemployment in the short run.
c. any change in unemployment created by making aggregate demand increase more
rapidly is temporary because people eventually revise their inflation expectations.
d. None of the above is correct.
If purchasing-power parity holds, a dollar will buy
a. more goods in foreign countries than in the United States.
b. as many goods in foreign countries as it does in the United States.
c. fewer goods in foreign countries than it does in the United States.
d. None of the above is implied by purchasing-power parity.
Which of the following typically rises during a recession?
a. consumption
b. unemployment
c. corporate profits
d. automobile sales
Figure 14-4. The figure shows a utility function for Dexter.
Refer to Figure 14-4. In what way(s) does the graph differ from the usual case?
a. The utility function shown here is upward-sloping, whereas in the usual case the
utility function is downward-sloping.
b. The utility function shown here is bowed downward (convex), whereas in the usual
case the utility function is bowed upward (concave).
c. On the graph shown here, wealth is measured along the horizontal axis, whereas in
the usual case saving is measured along the horizontal axis.
d. On the graph shown here, utility is measured along the vertical axis, whereas in the
usual case satisfaction is measured along the vertical axis.
For monitoring fluctuations in the national economy, which measure of income is best?
a. GDP
b. GNP
c. NNP
d. It does not matter very much which measure we use.
Figure 4-4
Refer to Figure 4-4. Which of the following would cause the demand curve to shift
from Demand C to Demand A in the market for tennis balls in the United States?
a. an increase in the price of tennis balls
b. a decrease in the price of tennis racquets
c. an expectation by buyers that their incomes will increase in the very near future
d. a decrease in the number of people in the United States under age 70
Figure 8-7
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is
a. $16, and the equilibrium quantity is 15.
b. $12, and the equilibrium quantity is 15.
c. $12, and the equilibrium quantity is 25.
d. $8, and the equilibrium quantity is 15.
Velocity is computed as
a. (P Y)/M.
b. (P M)/Y.
c. (Y M)/P.
d. (Y M)/V.
Today, producers changed their expectations about the future. This change
a. can cause a movement along a supply curve.
b. can affect future supply, but not today’s supply.
c. can affect today’s supply.
d. cannot affect either today’s supply or future supply.