A production possibilities frontier is a straight line when
a. the more resources the economy uses to produce one good, the fewer resources it has
available to produce the other good.
b. an economy is interdependent and engaged in trade instead of self-sufficient.
c. the rate of tradeoff between the two goods being produced is constant.
d. the rate of tradeoff between the two goods being produced depends on how much of
each good is being produced.
Most entrepreneurs finance their purchases of real capital using their past saving.
a. True
b. False
A Swiss company sells chocolates to a retailer in the United States. These sales by
themselves
a. decrease U.S. net export and Swiss net exports.
b. decrease U.S. net exports and increase Swiss net exports.
c. increase U.S. and Swiss net exports.
d. increase U.S. net exports and decrease Swiss net exports.
Marc puts prices on surfboards and skateboards at his sporting goods store. He is using
money as a unit of account.
a. True
b. False
A likely example of complementary goods for most people would be
a. butter and margarine.
b. lawnmowers and automobiles.
c. chips and salsa.
d. cola and lemonade.
Country A experienced a growth rate of real GDP per person of 0.5 percent per year
throughout the 1900’s. In view of other countries’ experiences, country A’s growth was
a. exceptionally high.
b. moderately high.
c. moderately low.
d. exceptionally low.
The inflation tax refers to
a. the revenue a government creates by printing money.
b. higher inflation which requires more frequent price changes.
c. the idea that, other things the same, an increase in the tax rate raises the inflation rate.
d. taxes being indexed for inflation.
According to the classical dichotomy, which of the following is influenced by monetary
factors?
a. nominal wages
b. unemployment
c. real GDP
d. All of the above are correct.
Table 28-4
2010 Labor Data for Adults (ages 16 and older) in Meditor
RefetoTable28-4. What is the adult male labor force in Meditor?
a. 50 million
b. 85 million
c. 90 million
d. 130 million
The efficiency-wage theory of worker health is more relevant for explaining
unemployment in less developed countries than in rich countries.
a. True
b. False
In the equation, Unemployment rate = Natural rate of unemployment – a (Αctual
inflation – Expected inflation), the variable ais a parameter that measures how much
a. actual inflation responds to expected inflation.
b. expected inflation responds to actual inflation.
c. the natural rate of unemployment responds to unexpected inflation.
d. actual unemployment responds to unexpected inflation.
Jake loaned Elwood $5,000 for one year at a nominal interest rate of 10 percent. After
Elwood repaid the loan in full, Jake complained that he could buy 4 percent fewer
goods with the money Elwood gave him than he could before he loaned Elwood the
$5,000. From this, we can conclude that the rate of inflation during the year was
a. -4 percent.
b. 4 percent.
c. 6 percent.
d. 14 percent.
Productivity is defined as the
a. amount of goods and services produced from each unit of labor input.
b. number of workers required to produce a given amount of goods and services.
c. amount of labor that can be saved by replacing workers with machines.
d. actual amount of effort workers put into an hour of working time.
In the United States in 2012, purchases of capital equipment, inventories, and structures
represented approximately
a. 3 percent of GDP.
b. 7 percent of GDP.
c. 13 percent of GDP.
d. 15 percent of GDP.
Because a government budget deficit represents
a. negative public saving, it increases national saving.
b. negative public saving, it decreases national saving.
c. positive public saving, it increases national saving.
d. positive public saving, it decreases national saving.
In conducting their research, economists often substitute historical events and historical
episodes for
a. theories and observations.
b. laboratory experiments.
c. models.
d. assumptions.
If the average cost of transporting a passenger on the train from Chicago to St. Louis is
$75, it would be irrational for the railroad to allow any passenger to ride for less than
$75.
a. True
b. False
If the demand for dollars in the market for foreign-currency exchange shifts left, then
the exchange rate
a. rises and the quantity of dollars exchanged rises.
b. rises and the quantity of dollars exchanged does not change.
c. falls and the quantity of dollars exchanged falls.
d. falls and the quantity of dollars exchanged does not change.
Figure 4-7
RefertoFigure4-7. The movement from Db to Da could be caused by
a. a decrease in price.
b. an increase in the price of a complement.
c. a technological advance.
d. an increase in the price of a substitute.
Expenditures by households on education are included in the consumption component
of GDP.
a. True
b. False
Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price
index was 177 in 2001 and 266 in 2006. Dewey’s 2006 salary in 2001 dollars is
a. $47,768.36.
b. $63,214.29.
c. $84,550.00.
d. $142,768.36.
The members of the Federal Reserve’s Board of Governors
a. are appointed by the president of the U.S. and confirmed by the U.S. Senate.
b. serve six-year terms.
c. are also the presidents of the regional Federal Reserve banks.
d. share power equally, with no governor having any more influence or power than any
other governor.
An economic theory about international trade that is based on the assumption that there
are only two countries trading two goods
a. is useless, since the real world has many countries trading many goods.
b. can be useful only in situations involving two countries and two goods.
c. can be useful in the classroom, but is useless in the real world.
d. can be useful in helping economists understand the complex world of international
trade involving many countries and many goods.
Economists differ in their views of the role of the government in promoting economic
growth. A controversial idea is that government should
a. lend support to the invisible hand by maintaining property rights and political
stability.
b. lower barriers and impediments to free trade.
c. encourage capital formation.
d. target and subsidize specific industries important for technological progress.
Table 3-8
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Refer to Table3-8. We could use the information in the table to draw a production
possibilities frontier for England and a second production possibilities frontier for
Spain. If we were to do this, measuring cheese along the horizontal axis, then
a. the slope of England’s production possibilities frontier would be 0.67 and the slope of
Spain’s production possibilities frontier would be -0.5.
b. the slope of England’s production possibilities frontier would be 1.5 and the slope of
Spain’s production possibilities frontier would be -2.
c. the slope of England’s production possibilities frontier would be .75 and the slope of
Spain’s production possibilities frontier would be -1.
d. the slope of England’s production possibilities frontier would be 2 and the slope of
Spain’s production possibilities frontier would be -.5.
Which of the following subcomponents of GDP can be either positive or negative?
a. inventory investment
b. exports
c. government purchases
d. All of the above are correct.
Figure 4-26
RefertoFigure4-26.Which of the following movements would illustrate the effect in the
market for ballroom dancing lessons resulting from the introduction of a popular new
television show called “Dancing with the Stars”?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
Figure 4-7
RefertoFigure4-7. If the demand curve for Good X shifts from Da to Db, then
a. firms would be willing to supply less of Good X than before at each possible price.
b. people are willing to buy more of Good X than before at each possible price.
c. people’s incomes must have decreased.
d. the price of Good X has decreased.
If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150
euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange
rate?
a. 1/.70 French MP3 players per U.S. MP3 player
b. 1 French MP3 players per U.S. MP3 player
c. .70 French MP3 players per U.S. MP3 player.
d. None of the above are correct.
Using the typical estimate of the sacrifice ratio, how much output would be lost in
reducing inflation from 3% to 1%?
a. 5%
b. 10%
c. 15%
d. 20%
A decrease in U.S. interest rates leads to
a. a depreciation of the dollar that leads to greater net exports.
b. a depreciation of the dollar that leads to smaller net exports.
c. an appreciation of the dollar that leads to greater net exports.
d. an appreciation of the dollar that leads to smaller net exports.
Employment can rise in one region of the country while it falls in another.
a. True
b. False
In a 100-percent-reserve banking system, if people decided to decrease the amount of
currency they held by increasing the amount they held in checkable deposits, then
a. M1 would increase.
b. M1 would decrease.
c. M1 would not change.
d. M1 might rise or fall.
Monetary policy is made by the.
Explain the connection between the vertical long-run aggregate supply curve and the
vertical long-run Phillips curve.
In a closed economy, GDP is $1000, government purchases are $200, and consumption
is $700. If the government has a budget surplus of $25, what are investment, taxes,
private saving, and national saving?
Last quarter Newton computers produced 3,000 computers. Two thousand of these
computers were sold to households, 750 were sold to businesses, and 250 were added to
Newton’s inventory. How many of the computers should have been included in last
quarter’s GDP?
What three types of goods are included in investment spending?
A country had a net capital outflow of 300 billion euros and exports of 400 billion
euros. What was the value of its imports?
If consumer confidence rises and inflation expectations remain unchanged, what
happens to inflation and unemployment? Defend your answer.
The is the most important automatic stabilizer.
According to a 1977 amendment to the Federal Reserve Act of 1913, what weights
should the Fed put on the goals of maximum employment, stable prices, and moderate
long-term interest rates?
Figure 4-30
RefertoFigure4-30.In this market for iPhones, the technology improves while all other
factors remain constant. Which curve(s) shift(s) and in which direction?
Suppose a 25-year-old worker purchases a $5,000 bond that pays 6% interest per year
which she plans to withdraw when she retires in 40 years. How much will the $5,000
accumulate to in 40 years? If the worker faces a marginal tax rate of 30% on interest
income, how much will the $5,000 accumulate to in 40 years?
If income rises in the market for a normal good, will the demand curve for the normal
good shift to the right or to the left?
Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that
the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?
What is the main difference between a centrally planned economy and a market
economy?
If the reserve ratio is 20 percent, how much money can be created from $100 of
reserves? Show your work.
A company has an investment project that will cost $2 million today and yield a payoff
of $3 million in 5 years. If the interest rate is 9%, should the firm undertake the project?
Show evidence to support your answer.
Table 4-16
The following table shows the supply and demand schedules in a market.
RefertoTable4-16. What is the equilibrium quantity in this market?
Suppose that there are no crowding-out effects and the MPCis .9. By how much must
the government increase expenditures to shift the aggregate demand curve right by $10
billion?