Exhibit 2-4
The line joining points A and D is called the
a. production function frontier.
b. utility function.
c. production possibilities frontier.
d. demand curve.
A.W. Phillips collected data on the rate of change in money wages and plotted it against
unemployment rates in the United Kingdom. The curve he fit to the data showed that
a. the rate of change of money wage rates and unemployment rates were inversely
related.
b. the rate of change of money wage rates and unemployment rates were directly
related.
c. the rate of change of money wage rates and unemployment rates were independent.
d. as money wage rates increased, the unemployment rate was cut in more than half.
When real interest rates fall in the United States relative to interest rates in Japan, the
yen appreciates and the dollar depreciates.
a. True
b. False
According to economist John Taylor, the Fed set its federal funds rate target too high
during the period 2002-early 2006, which contributed to the financial crisis of
2007-2009.
a. True
b. False
Exhibit 3-5
In the market shown, if equilibrium was originally at point Z and the new equilibrium is
now at point V, this change may have been caused by
a. a decrease in consumers’ income (assuming that this is an inferior good) and a
simultaneous decline in technology in the production of this good.
b. an increase in consumers’ income (assuming that this is an inferior good) and a
simultaneous improvement in technology in the production of this good.
c. a decrease in consumers’ income (assuming that this is an inferior good) and no
change in supply.
d. an increase in consumers’ income (assuming that this is an inferior good) and no
change in supply.
Exhibit 39-1
Given the target price of PT, the deficiency payment per unit is
a. PT – P2.
b. PT + P1.
c. PT – P2.
d. PT – P1.
Some of our farm fields are being left unused. Does this have any implications for the
economy’s PPF diagram (with agricultural products on one axis and all other products
on the other axis)?
a. No implications, because the PPF deals only with resources in use.
b. The PPF cannot be drawn if some resources are idle.
c. With unemployed resources, we are at a point below the PPF.
d. The PPF would be upward sloping.
Suppose health-care reform Y makes it unlawful for insurance companies to deny
insurance to persons with a preexisting disease and sets a fine for those people who do
not buy insurance.It follows that if the fine is
a. larger than the benefits derived from not buying insurance right away, then people
will not buy the insurance and pay the fine.
b. smaller than the benefits derived from not buying the insurance right away, then
people will not buy the insurance and pay the fine.
c. larger than the benefits derived from not buying insurance right away, then people
will buy the insurance right away and not pay the fine.
d. b and c
e. none of the above
According to the Taylor Rule: if the inflation rate is 2% and the GDP gap is 3%, what
does the federal funds rate target equal?
a. 9.5 percent
b. 7.5 percent
c. 5.5 percent
d. 8.5 percent
Exhibit 6-2
The unemployment rate in year 1 is
a. 12 1/2 percent.
b. 70 percent.
c. 87 1/2 percent.
d. 30 percent.
e. 10 percent.
A tariff is imposed on strawberries.The tariff will ___________ the price of
strawberries in the domestic market, _____________ the quantity of strawberries
imported in the domestic market, and ____________ consumers€ surplus.
a. raise; lower; lower
b. lower; raise; lower
c. raise; lower; raise
d. lower; lower; raise
To derive net domestic product (NDP) from gross domestic product (GDP), we must
subtract ________________ from GDP.
a. the capital consumption allowance
b. gross private domestic investment
c. imports
d. inventory investment
e. the statistical discrepancy
In a two-country world (consisting of country X and country Y), an increase in Real
GDP in country X will shift country Y€s AD curve leftward.
a. True
b. False
The economy is in a recessionary gap and there is evidence that the economy is in a
liquidity trap. In this situation, a Keynesian is likely to advocate the use of__________
policy.
a. expansionary fiscal
b. contractionary fiscal
c. expansionary monetary
d. contractionary monetary
New classical economists believe that there is
a. a short-run tradeoff between inflation and unemployment when policy is
unanticipated.
b. a short-run tradeoff between inflation and unemployment when policy is correctly
anticipated.
c. no short-run tradeoff between inflation and unemployment when policy is correctly
anticipated.
d. a and b
e. a and c
Changing from a barter economy to a money economy can reduce transaction costs.
a. True
b. False
Which of the following statements is true?
a. Bad weather isn’t always that bad for farmers’ incomes.
b. An individual farmer would probably increase his revenues if he experienced good
weather and other farmers experienced bad weather.
c. Price elasticity of demand is a relevant factor to a farmer’s income.
d. a and b
e. a, b, and c
Which of the following is a positive macroeconomics statement?
a. The central bank should increase the nation’s money supply.
b. The increase in the nation’s money supply helped push the nation’s unemployment
rate down in the short run.
c. Ford Motor Company’s new advertising campaign ended up hurting General Motors’
sales.
d. The local government ought to spend more on recreational facilities.