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Figure 14.3
If the quantity of money demanded is less than the quantity of money supplied, then the
interest rate will:
A) change in an uncertain direction.
B) rise.
C) remain constant.
D) fall.
Bananas and apples are substitutes. When the price of bananas falls and a technological
advancement in apple production occurs at the same time:
A) the equilibrium price of apples rises and the equilibrium quantity of apples falls.
B) the equilibrium price of apples rises and the equilibrium quantity of apples rises.
C) the equilibrium price of apples rises and the equilibrium quantity of apples might
rise or fall.
D) the equilibrium price of apples falls and the equilibrium quantity of apples might
rise or fall.
An example of an automatic stabilizer is:
A) the food stamp program.
B) changing the tax laws to increase the marginal tax rates.
C) the indexation of social security benefits to the consumer price index.
D) the purchase of military equipment.
Table 2.1
Kaitlyn and Larissa have formed a dog bathing and grooming business business. The
number of dogs they can bathe or groom in any given day is depicted in Table 2.1. The
opportunity cost of grooming the sixth dog in a day is bathing ________ dog(s).
A) 0
B) 5
C) 6
D) 7
If the price index in 2000 is 120 and the price index in 2001 is 112, then the economy
experiences ________ between 2000 and 2001.
A) inflation
B) hyperinflation
C) disinflation
D) deflation
Which of the following appears in M2 and NOT M1?
A) currency
B) checking account balances
C) money market mutual funds
D) traveler's checks
Tax cuts aimed at businesses can stimulate
A) social spending.
B) private consumption.
C) investment spending.
D) net exports.
Suppose Belgium produces only two goods, chocolate and lace. If Belgium has a
comparative advantage in lace, a move toward free trade will
A) benefit chocolate workers, harm lace workers in the short run, but benefit the nation
as a whole.
B) harm chocolate workers in the short run, benefit lace workers, but benefit the nation
as a whole.
C) harm chocolate workers in the short run, harm lace workers, but benefit the nation as
a whole.
D) benefit chocolate workers, harm lace workers in the short run, but harm the nation as
a whole.
Figure 14.6
Refer to Figure 14.6. The money supply curve will shift from to , if:
A) the Fed decreases the discount rate.
B) the price level increases.
C) the equilibrium level of output decreases.
D) the Fed sells U.S. government bonds in the open market.
If the quantity equation holds, then a country operating under a gold standard will
experience deflation:
A) when it buys more goods from another country using gold.
B) when people find other non-monetary uses for gold.
C) when the supply of gold decreases.
D) All of the above are correct.
Suppose that the unemployment rate is ________ the natural rate. We would expect
prices to fall, money demand to fall, interest rates to fall, and total demand to
________.
A) above; rise
B) above; fall
C) below; rise
D) below; fall
Judy demands more peanuts as her income increases. From this, we can conclude that,
for Judy:
A) peanuts are a normal good.
B) peanuts are an inferior good.
C) peanuts are a complementary good.
D) peanuts are a substitute good.
Recall Application 1, "Shifts in the Natural Rate of Unemployment," to answer the
following questions:
According to the application, William Dickens estimated that the natural rate of
unemployment since the 1990s has been:
A) decreasing.
B) increasing.
C) constant
D) unmeasurable.
