If there is a positive demand shock, which of the following would represent the most
likely short and long-run outcomes? (Assume the economy was initially at full
employment)
a. In the short run, real GDP and the price level would increase; in the long run, real
GDP would return to its original level while the price level would rise even further.
b. In the short run, real GDP and the price level would increase; in the long run, real
GDP and the price level would return to their original level.
c. In the short run, real GDP would increase and the price level would decrease; in the
long run, real GDP would return to its original level while the price level would rise
even further.
d. In the short run, real GDP and the price level would decrease; in the long run, real
GDP would return to its original level while the price level would rise even further.
e. In the short run, real GDP and the price level would increase; in the long run, real
GDP would increase while the price level would return to its original level.
In Figure 16-5, which of the following is true?
Figure 16-5
Quantities of goods that can be produced in one day with available resources:
a. Both countries can benefit from trade if Panama produces bicycles and Costa Rica
produces rugs.
b. Both countries can benefit from trade if Panama produces both rugs and bicycles.
c. Both countries can benefit from trade if Panama produces rugs and Costa Rica
produces bicycles.
d. Both countries can benefit from trade if Costa Rica produces bicycles and rugs.
e. Neither country can benefit from trade since Panama has an absolute advantage in
producing both bicycles and rugs.
If the supply curve is perfectly inelastic and an excise tax is imposed
“Rolling over” the debt means
a. to repay old bonds that come due for payment by issuing new bonds.
b. to repay old bonds that come due by printing money.
c. dividing the tax burden of the debt across the fifty states based on their share of the
population.
d. dividing the tax burden of the debt across the fifty states based on their share of
economic activity.
e. to repay old bonds that come due by giving gold to the bondholders from the national
gold depository in Fort Knox..
Ongoing inflation has its own momentum because
a. prices rise whenever firms see other prices rising
b. the public learns to expect inflation and adjusts its decisions in response
c. public officials are unwilling to stop prosperity
d. more and more people now have jobs
e. we are always playing catch up, trying to get what we lost when others raise prices
Suppose that equilibrium in the dollar-pound market occurs where 300 million pounds
are demanded at a price of $1.65 per pound. If the current exchange rate is $1.80 per
pound, there is will be a(n)
a. rightward movement along the supply of British pounds curve
b. leftward movement along the supply of British pounds curve
c. rightward shift of the supply of British pounds curve
d. leftward shift of the supply of British pounds curve
e. increase in the exchange rate
A firm’s total revenue
Crowding out occurs
a. when an increase in government spending crowds out tax revenues.
b. when an increase in government spending increases investment spending.
c. when an increase in government spending crowds out bonds.
d. when an increase in government spending crowds out other types of spending.
e. when an increase in government spending crowds out the money supply.
Suppose the marginal propensity to consume is 0.75. If government purchases increase
by $100 billion and the extra expenditure is financed with a net tax of $100 billion, by
how much will output change?
a. -$400 billion
b. $100 billion
c. $400 billion
d. $0
e. -$100 billion
Patents and copyrights are designed to
Which of the following is a major macroeconomic goal?
a. Low prices
b. Declining prices
c. Pure competition
d. Stable prices
e. High prices
If the opportunity cost of a television set equals 20 cameras in China, but 10 cameras in
Japan, then we know
a. all of the following
b. that China has a comparative advantage in producing cameras
c. that Japan has a comparative advantage in producing TV sets
d. that Japan may well have an absolute disadvantage in producing both goods
e. that market exchange of 1 TV set for 15 cameras would produce not only mutually
beneficial trade, but would also split the gains from trade equally between the two
countries
The classical model explains away unemployment as a long-run problem by assuming
that
a. coordination in labor markets will occur within an acceptable period of time
b. the economy consists of multiple, coordinated sectors
c. it causes firms to cut back on their long-run production plans
d. what is a problem during one period will seem more like an opportunity for
economic growth during another period
e. higher saving will stimulate increased investment
The slope of the demand curve and the price elasticity of demand are
If Japan imposes a tariff on shoes from Argentina, then
a. the price of Argentinean shoes sold in Japan will fall
b. the quantity of Argentinean shoes sold in Japan will rise
c. Japanese shoe producers will benefit
d. Japanese consumers will benefit from lower prices for Japanese shoes
e. Japanese consumers will benefit from lower prices for Argentinean shoes
If the labor force in an economy is not fully employed, then