Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the
United States. By itself, this sale
a. increases U.S. net exports and decreases Russian net exports.
b. increases U.S. net exports and has no effect on Russian net exports.
c. decreases U.S. net exports and increases Russian net exports.
d. decreases U.S. net exports and has no effect on Russian net exports.
Which of the following statements is correct about the relationship between the nominal
interest rate and the real interest rate?
a. The real interest rate is the nominal interest rate times the rate of inflation.
b. The real interest rate is the nominal interest rate minus the rate of inflation.
c. The real interest rate is the nominal interest rate plus the rate of inflation.
d. The real interest rate is the nominal interest rate divided by the rate of inflation.
If the U.S. real exchange rate appreciates, U.S. exports to Europe
a. and European exports to the U.S. both rise.
b. and European exports to the U.S. both fall.
c. rise, and European exports to the U.S. fall.
d. fall, and European exports to the U.S. rise.
When a binding price ceiling is imposed on a market to benefit buyers,
a. every buyer in the market benefits.
b. every buyer and seller in the market benefits.
c. every buyer who wants to buy the good will be able to do so, but only if he waits in
long lines.
d. some buyers will not be able to buy any amount of the good.
Suppose that the MPC is 0.60; there is no investment accelerator; and there are no
crowding-out effects. If government expenditures increase by $25 billion, then
aggregate demand
a. shifts rightward by $62.5 billion.
b. shifts rightward by $50.0 billion.
c. shifts rightward by $32.5 billion.
d. None of the above is correct.
The government enforces property rights by
a. requiring property owners to pay property taxes.
b. providing police and courts.
c. forcing people to own property.
d. providing public parks and recreation facilities.
The word “efficient” in the term “efficient markets hypothesis” refers to the idea that
a. fundamental analysis is an efficient way to go about choosing which stocks to buy or
sell.
b. stock prices move upward and downward “efficiently,” rather than following a
“random walk.”
c. the stock market is “informationally efficient.”
d. All of the above are correct.
Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three
buyers of oranges, and only three oranges can be supplied per day.
Refer to Table 7-5. The market quantity of oranges demanded per day is exactly 5 if
the price of an orange, P, satisfies
a. $1.00 < P < $1.50.
b. $0.80 < P < $1.50.
c. $0.80 < P < $1.00.
d. $0.75 < P < $0.80.
Classical economist David Hume observed that as the money supply expanded after
gold discoveries it took some time for prices to rise and in the meantime the economy
enjoyed higher employment and production. This is inconsistent with monetary
neutrality because
a. monetary neutrality would mean that neither prices nor production should have risen.
b. monetary neutrality would mean that production should have risen, but prices should
not have.
c. monetary neutrality would mean the prices should have risen, but production should
not have changed.
d. monetary neutrality would mean that prices and production should both have fallen.
Figure 7-13
Refer to Figure 7-13. Suppose the price of the good is $400. Then, on the first unit of
the good that is sold, producer surplus amounts to
a. $200.
b. $300.
c. $400.
d. $450.
Which of the following decreases if the U.S. imposes an import quota on computer
components?
a. U.S. imports and U.S. exports.
b. U.S. imports but not U.S. exports.
c. U.S. exports but not U.S. imports.
d. Neither U.S. exports nor U.S. imports.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is
a. $2.50.
b. $5.
c. $7.50.
d. $10.
Which of the following actions best illustrates moral hazard?
a. A person adds risky stock to his portfolio.
b. A person who has narrowly avoided many accidents applies for automobile
insurance.
c. A person is unwilling to buy a stock when she believes its price has an equal chance
of rising or falling $10.
d. A person purchases homeowners insurance and then checks his smoke detector
batteries less frequently.
Which of the following would make both the equilibrium real interest rate and the
equilibrium quantity of loanable funds decrease?
a. The demand for loanable funds shifts right.
b. The demand for loanable funds shifts left.
c. The supply of loanable funds shifts right.
d. The supply of loanable funds shifts left.
If policymakers accommodate an adverse supply shock, then in the short run the
unemployment rate
a. and the inflation rate rise.
b. and the inflation rate fall.
c. rises and the inflation rate falls.
d. falls and the inflation rate rises.
If the government of a country with a zero trade balances increases its budget deficit,
then interest rates
a. rise and the trade balance moves to a surplus.
b. rise and the trade balance moves to a deficit.
c. fall and the trade balance moves to a surplus.
d. fall and the trade balance moves to a deficit.
Markovich Corporation is considering building a new plant. It will cost $1 million
today to build it and it will generate revenues of $1.121 million three years from today.
Of the interest rates below, which is the highest interest rate at which Markovich still
would be willing to build the plant?
a. 3 percent
b. 3.5 percent
c. 4 percent
d. 4.5 percent
In the long run, the quantity supplied of most goods
a. will increase in almost all cases, regardless of what happens to price.
b. cannot respond at all to a change in price.
c. can respond to a change in price, but the change is almost always inconsequential.
d. can respond substantially to a change in price.
Digital Publishing has a share price of $28, retained earnings of $0.60 per share, and a
dividend yield of 5 percent. What is Digital’s price-earnings ratio?
a. 24
b. 16
c. 14
d. 12
Suppose that the central bank must follow a rule that requires it to increase the money
supply when the price level falls and decrease the money supply when the price level
rises. If the economy starts from long-run equilibrium and aggregate supply shifts left,
the central bank must
a. decrease the money supply, which will move output back towards its long-run level.
b. decrease the money supply, which will move output farther from its long-run level.
c. increase the money supply, which will move output back towards its long-run level.
d. increase the money supply, which will move output farther from its long-run level.
The invention of the telegraph led to the loss of jobs for those who had delivered mail
by horse, but created jobs for telegraph operators and delivery persons. This is an
example of
a. structural unemployment created by efficiency wages.
b. structural unemployment created by sectoral shifts.
c. frictional unemployment created by efficiency wages.
d. frictional unemployment created by sectoral shifts.
Which of the following would increase productivity?
a. an increase in the physical capital stock per worker
b. an increase in human capital per worker
c. an increase in natural resources per worker
d. All of the above are correct.
According to computer estimates using a traditional macroeconomic model, the Obama
administration found that the multiplier for tax cuts and government expenditures were
respectively
a. 0.99 and 1.59.
b. 1.59 and 0.99
c. 1.3 and 1.7
d. 1.7 and 1.3
The long-run aggregate supply curve
a. is vertical.
b. is a graphical representation of the classical dichotomy.
c. indicates monetary neutrality in the long run.
d. All of the above are correct.
Figure 14-5. On the graph, xrepresents risk and yrepresents return.
Refer to Figure 14-5. Point A represents a situation in which
a. all of a person’s savings are allocated to a class of safe assets.
b. the person knows with certainty that his or her return will be 3 percent.
c. the standard deviation of the person’s portfolio is zero.
d. All of the above are correct.
In 2009, the imaginary nation of Florastan had a population of 8,044 and real GDP of
36,198,000. In 2010 it had a population of 7,800 and real GDP of 35,880,000. What
was the growth rate of real GDP per person in Florastan between 2009 and 2010?
a. -2.2 percent
b. -0.7 percent
c. 2.2 percent
d. 4.5 percent
A direct or positive relationship exists between a country’s
a. productivity and its standard of living.
b. amount of government spending and its productivity.
c. total population and its average citizen’s income.
d. rate of population growth and the extent of its trade with other countries.
Figure 14-1. The figure shows a utility function.
Refer to Figure 14-1. Suppose the person to whom this utility function applies begins
with $600 in wealth. Starting from there,
a. she would be willing to accept a coin-flip bet that would result in her winning $200 if
the result was “heads” or losing $200 if the result was “tails.”
b. the pain of losing $200 of her wealth would equal the pleasure of adding $200 to her
wealth.
c. the pain of losing $200 of her wealth would exceed the pleasure of adding $200 to
her wealth.
d. the pleasure of adding $200 to her wealth would exceed the pain of losing $200 of
her wealth.
In 2009 Congress passed legislation providing states with funds to build roads and
bridges. It also instituted tax cuts. Which of these shifts aggregate demand right?
a. only the increased funding for states
b. only the tax cuts
c. both the increased funding for states and the tax cuts
d. neither the increased funding for states nor the tax cuts
By holding insurance a person
a. reduces the risk of a bad outcome, such as their house burning down.
b. shares risk and so reduces the burden of risk.
c. Both A and B are correct.
d. Neither A nor B are correct.
When the Fed conducts open-market purchases,
a. banks buy Treasury securities from Fed, which increases the money supply.
b. banks buy Treasury securities from the Fed, which decreases the money supply.
c. it buys Treasury securities, which increases the money supply.
d. it buys Treasury securities, which decreases the money supply.
When a surplus exists in a market, sellers
a. raise price, which increases quantity demanded and decreases quantity supplied, until
the surplus is eliminated.
b. raise price, which decreases quantity demanded and increases quantity supplied, until
the surplus is eliminated.
c. lower price, which increases quantity demanded and decreases quantity supplied,
until the surplus is eliminated.
d. lower price, which decreases quantity demanded and increases quantity supplied,
until the surplus is eliminated.
In addition to advising the president, one duty of the Council of Economic Advisors is
to
a. prepare the federal budget.
b. write government regulations.
c. advise Congress on economic matters.
d. write the annual Economic Report of the President.
A multilateral approach to free trade has greater potential to increase the gains from
trade than a unilateral approach, because the multilateral approach can reduce trade
restrictions abroad as well as at home.
The key determinant of net capital outflow is the real interest rate.
Good assumptions simplify a problem without substantially affecting the answer.
In the circular-flow diagram, firms own the factors of production and use them to
produce goods and services.
Lenders buy bonds and borrowers sell them.
When a minimum-wage law forces the wage to remain above the level that balances
supply and demand, the quantity of labor supplied is higher and the quantity demanded
of labor is lower than at the equilibrium wage.
Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the
price is higher. Jason plans to engage in arbitrage.
Advocates of government-run employment agencies and public training programs
believe they make job search more efficient.
A union is an employer association that bargains with workers over wages, benefits, and
working conditions.
Equality refers to how the pie is divided, and efficiency refers to the size of the
economic pie.
Money is the only asset that functions as a store of value.
The recession of 2008-2009 was associated with a fall in housing prices which shifted
aggregate demand to the left.
The interest-rate effect is partially explained by the fact that a higher price level reduces
money demand.
Economists feel that national security concerns never provide a legitimate rationale for
trade restrictions.
The law of demand states that, other things equal, when the price of a good rises, the
quantity demanded of the good rises, and when the price falls, the quantity demanded
falls.
When policymakers set prices by legal decree, they obscure the signals that normally
guide the allocation of society’s resources.
Other things the same, if the Fed increases the rate at which it increases the money
supply then the short-run Phillips curve shifts right in the long run.
Expenditures by households on education are included in the consumption component
of GDP.
The group of goods and services used to compute the GDP deflator changes
automatically over time, but the group of goods and services used to compute the CPI
does not.