Microeconomics analyzes individual parts of the economy rather than broad economic
aggregates.
Which of the following are the best examples of substitute goods?
a. personal computers and computer software programs
b. milk and cookies
c. Packard Bell and IBM personal computers
d. hot dogs and mustard
e. contact lenses and lens cleaning solutions
Bill can cook dinner in 45 minutes and mow the lawn in 1.5 hours. Eileen can cook
dinner in 1.5 hours and mow the lawn in 2 hours. Which of the following statements is
correct?
a. Bill should specialize in both tasks.
b. Bill should specialize in cooking dinner; Eileen should specialize in mowing the
lawn.
c. Bill should specialize in mowing the lawn; Eileen should specialize in cooking
dinner.
d. Eileen should specialize in both tasks.
e. neither person should specialize.
If the unemployment rate is 6 percent, that means that 6 percent of
a. the population is not working
b. potential workers do not have jobs
c. the workforce is searching for work but has not found a job at that time
d. the individuals who are looking for work cannot find jobs
e. the population is not looking for a job
Which of the following statements about the effects of an increase in government
purchases is most accurate?
a. In the classical model, it will cause complete crowding out. In the short-run macro
model, crowding out will be incomplete.
b. In the classical model, it will cause incomplete crowding out. In the short-run macro
model, crowding out will be complete.
c. Crowding out will be complete in both the classical and short-run macro model.
d. Crowding out will be incomplete in both the classical and short-run macro model.
e. In the classical model, the increase in government spending will lead to a decrease in
investment spending and autonomous consumption. In the short-run macro model, it
will not.
In the short run, following an increase in government purchases,
a. the aggregate expenditure line shifts upward by more than the increase in government
purchases
b. real GDP declines by the change in government purchases times the expenditure
multiplier
c. the money supply curve shifts rightward because real income rises
d. the interest rate rises because the money demand curve shifts rightward
e. autonomous consumption and investment increase because of the increase in real
income
If we know that the exchange rate is 0.8 dollars per euro, then we know that the
exchange rate of euros per dollars is
a. 0.8
b. 1.8
c. 1.25
d. less than 1.0
e. 5
Use the table below to determine the impact on consumption spending of a $100
increase in net taxes.
a. Consumption will decrease by $80.
b. Consumption will increase by $80.
c. The marginal propensity to consume will increase to .91.
d. The marginal propensity to consume will decrease to .73.
e. The change in net taxes will not change consumption.
In the classical model, the supply of funds to the loanable funds market comes from
a. household saving and the government’s budget surplus, if any
b. net taxes
c. household saving and the government budget deficit, if any
d. planned investment
e. total income
The deposit-creation process can continue as long as
a. banks have required reserves
b. banks have excess reserves
c. the Fed sells bonds
d. banks sell bonds to the public
e. the required reserve ratio does not change
If the Fed wishes to raise the interest rate, it will
a. increase the money supply
b. decrease the money supply
c. increase money demand
d. decrease money demand
e. simply set a higher market interest rate
Refer to Figure 15-14. Suppose a supply shock moves the economy from point A to
point B. In the long run, we would expect
a. the increase in real GDP to increase wages and shift the aggregate demand curve to
the right
b. the increase in real GDP to increase wages and shift the aggregate supply curve back
to AS1
c. the decrease in the price level to encourage buying and shift the aggregate demand
curve to the right
d. wages to fall, causing the aggregate supply curve to shift rightward until full
employment is restored
e. the economy to remain at point B.
Human capital is defined as
a. the skills and knowledge possessed by workers
b. the tools used by labor
c. equipment and machinery used to train workers
d. buildings purchased by households rather than by businesses
e. equipment and machinery used to aid household production and increase available
leisure time
If the Consumer Price Index (CPI) increases from 100 to 125 and the nominal wage
increases from $125 to $300, what is the change in the real wage?
a. +$175
b. +$300
c. +$125
d. +$115
e. -$175
Which of the following is the best example of an intermediate good?
a. military uniforms purchased by the government
b. flour purchased by a bakery for the production of bread
c. a new computer purchased by a software developer
d. screwdrivers purchased by a homeowner for home repairs
e. aprons purchased by restaurant chefs
Physical capital differs from raw materials in the sense that raw materials
a. have a longer useful life in production
b. are considered human capital
c. cannot be used to produce goods and services
d. are used up in production
e. are not a resource used in production
Using the following information on a hypothetical economy in equilibrium, calculate
total output for 2008.
If exports are exactly equal to imports, total output for 2008 is
a. $5.2 trillion
b. $5.7 trillion
c. $8.4 trillion
d. $8.7 trillion
e. $13.9 trillion
Which of the following is considered in the AS/AD model but was not considered in the
short-run macro model?
a. The effect of price changes.
b. The effect of interest rate changes.
c. Increases in government spending.
d. Monetary policy.
e. Decreases in government spending.