A U.S. firm buys bonds issued by a technology center in India. This purchase is an
example of U.S.
a. foreign portfolio investment. By itself it is an increase in U.S. holdings of foreign
bonds and increases U.S. net capital outflow.
b. foreign portfolio investment. By itself it is an increase in U.S. holdings of foreign
bonds and decreases U.S. net capital outflow.
c. foreign direct investment. By itself it is an increase in U.S. holdings of foreign bonds
and increases U.S. net capital outflow.
d. foreign direct investment. By itself it is an increase in U.S. holdings of foreign bonds
and decreases U.S. net capital outflow.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The producer surplus without the tax is
a. $3,000.
b. $8,000.
c. $12,000.
d. $24,000.
Banks
a. play a role in creating an asset that people can use as a medium of exchange.
b. are financial intermediaries, but mutual funds are not financial intermediaries.
c. are financial markets, as are bond markets.
d. All of the above are correct.
M1 equals currency plus demand deposits plus
a. nothing else.
b. other checkable deposits.
c. traveler’s checks plus other checkable deposits.
d. traveler’s checks plus other checkable deposits plus savings deposits.
The Fed can influence the money supply by
a. changing how much it lends to banks.
b. changing the interest rate it pays banks on the reserves they are holding.
c. using open-market operations.
d. All of the above are correct.
Suppose that Jane enjoys Diet Coke so much that she consumes one can every day.
Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet
Coke rises, Jane decreases her consumption by only a very small amount. But if the
price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples
illustrate the importance of
a. the availability of close substitutes in determining the price elasticity of demand.
b. a necessity versus a luxury in determining the price elasticity of demand.
c. the definition of a market in determining the price elasticity of demand.
d. the time horizon in determining the price elasticity of demand.
Economists generally support
a. trade restrictions.
b. government management of trade.
c. export subsidies.
d. free international trade.
Which of the following is correct?
a. There is consensus among economists that unions are good for the economy.
b. There is consensus among economists that unions are bad for the economy.
c. There is consensus among economists that, on net, unions have almost no impact on
macroeconomic variables.
d. There is no consensus among economists about whether unions are good or bad for
the economy.
Suppose that butchers and bakers have no unions. Now suppose the butchers form a
union. What does this do the labor supply of and wages of bakers?
a. It increases the labor supply and wages of bakers.
b. It increases the labor supply and decreases the wages of bakers.
c. It decreases the labor supply and increases the wages of bakers.
d. It decreases the labor supply and wages of bakers.
In the open-economy macroeconomic model, other things the same, which of the
following both make the exchange rate fall?
a. U.S. investment demand falls and foreign demand for U.S. goods falls
b. U.S. investment demand falls and foreign demand for U.S. goods rises
c. U.S. investment demand rises and foreign demand for U.S. goods falls
d. U.S. investment demand rises and foreign demand for U.S. goods rises
Figure 6-24
Suppose the government imposes a $2 on this market.
Refer to Figure 6-24. The buyers will bear a higher share of the tax burden than sellers
if the demand is
a. D1, and the supply is S1.
b. D2, and the supply is S1.
c. D1, and the supply is S2.
d. D2, and the supply is S2.
Suppose the economy is in long-run equilibrium. In a short span of time, there is a
decline in the money supply, a tax increase, a pessimistic revision of expectations about
future business conditions, and a rise in the value of the dollar. In the short run, we
would expect
a. the price level and real GDP both to rise.
b. the price level and real GDP both to fall.
c. the price level and real GDP both to stay the same.
d. All of the above are possible.
As of 2008, using real GDP per person as a measure, we would classify
a. the United States and Mexico as advanced economies and Bangladesh as a
middle-income country.
b. Canada as an advanced economy, Mexico as a middle-income country, and Pakistan
as a poor country.
c. Japan and India as advanced economies and Mexico as a poor country.
d. Japan as an advanced economy, the United Kingdom as a middle-income country,
and Argentina as a poor country.
Which of the following statements best captures the relationship between
microeconomics and macroeconomics?
a. For the most part, microeconomists are unconcerned with macroeconomics, and
macroeconomists are unconcerned with microeconomics.
b. Microeconomists study markets for small products, whereas macroeconomists study
markets for large products.
c. Microeconomics and macroeconomics are distinct from one another, yet they are
closely related.
d. Microeconomics is oriented toward policy studies, whereas macroeconomics is
oriented toward theoretical studies.
Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P
represents the price of crude oil.
Refer to Figure 9-14. A result of this country allowing international trade in crude oil is
as follows:
a. The well-being of domestic crude-oil producers is now higher in that they now sell
more crude oil at a higher price per barrel.
b. The effect on the well-being of domestic crude-oil consumers is unclear in that they
now buy more crude oil, but at a higher price per barrel.
c. The effect on the well-being of the country is unclear in that domestic producer
surplus increases, while the effect on domestic consumer surplus is unclear.
d. All of the above are correct.
The Federal Deposit Insurance Corporation
a. protects depositors in the event of bank failures.
b. has become insolvent in recent years due to a large number of bank failures.
c. is part of the Federal Reserve System.
d. in practice has seldom been of much use.
Which of the following would a permanent increase in the growth rate of the money
supply change permanently?
a. inflation
b. unemployment
c. both inflation and unemployment
d. neither inflation nor unemployment
Other things the same, which of the following responses would we expect from an
increase in U.S. interest rates?
a. Your aunt puts more money in her savings account.
b. Foreign citizens decide to buy fewer U.S. bonds.
c. You decide to purchase a new oven for your cookie factory.
d. All of the above are correct.
In a given market, how are the equilibrium price and the market-clearing price related?
a. There is no relationship.
b. They are the same price.
c. The market-clearing price exceeds the equilibrium price.
d. The equilibrium price exceeds the market-clearing price.
A U.S. pharmacy buys drugs from a British company and pays for them with US
dollars. This transaction
a. increases British net exports, and increases U.S. net capital outflow.
b. increases British net exports, and decreases U.S. net capital outflow.
c. decreases British net exports, and increases U.S. net capital outflow.
d. decreases British net exports, and decreases U.S. net capital outflow.
The Fisher effect is crucial for understanding changes over time in
a. the nominal interest rate.
b. the real interest rate.
c. the inflation rate.
d. the unemployment rate.
Figure 8-10
Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity
sold in the market after the tax to Q2. The price that buyers pay is
a. P0.
b. P2.
c. P5.
d. P8.
Figure 12-1. On the horizontal axis, K/L represents capital (K) per worker (L). On the
vertical axis, Y/L represents output (Y) per worker (L).
Refer to Figure 12-1. The curve becomes flatter as the amount of capital per worker
increases because of
a. increasing returns to capital.
b. increasing returns to labor.
c. diminishing returns to capital.
d. diminishing returns to labor.
According to liquidity preference theory, the slope of the money demand curve is
explained as follows:
a. Interest rates rise as the Fed reduces the quantity of money demanded.
b. Interest rates fall as the Fed reduces the supply of money.
c. People will want to hold less money as the cost of holding it falls.
d. People will want to hold more money as the cost of holding it falls.
Figure 3-6
Maxine’s Production Possibilities Frontier Daisy’s Production Possibilities
Frontier
Refer to Figure 3-6. Maxine has an absolute advantage in the production of
a. both goods and a comparative advantage in the production of pies.
b. both goods and a comparative advantage in the production of tarts.
c. neither good and a comparative advantage in the production of pies.
d. neither good and a comparative advantage in the production of tarts.
An increase in the price of a good will
a. increase supply.
b. decrease supply.
c. increase quantity supplied.
d. decrease quantity supplied.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The per-unit burden of the tax on sellers is
a. $20.
b. $200.
c. $300.
d. $500.
When government expenditures increase, the interest rate
a. increases, making the change in aggregate demand larger.
b. increases, making the change in aggregate demand smaller
c. decreases, making the change in aggregate demand larger.
d. decreases, making the change in aggregate demand smaller.
Considering a plot of the inflation rate and the unemployment rate, one might
conjecture that the short run Phillips curve was further to the right in the first part of the
2000’s than it was in the last part of the 1990s and 2000.
a. If so, this might have been the result of a negative supply shock or an increase in
expected inflation.
b. If so, this might been the result of a negative supply shock, or a decrease in expected
inflation.
c. If so, this might have been the result of a positive supply shock, or an increase in
expected inflation.
d. If so, this might have been the result of a positive supply shock, or a decrease in
expected inflation.
Other than OPEC, the shortage of gasoline in the U.S. in the 1970s could also be
blamed on
a. a sharp increase in the demand for gasoline that was brought on by the Vietnam War.
b. the government’s policy of maintaining a price ceiling on gasoline.
c. an indifference among U.S. consumers toward conservation.
d. the lack of substitutes for crude oil.
Suppose the Congress and president decreased the maximum annual contributions
limits to retirement accounts and at the same time reduced the budget deficit. What
would happen to the interest rate?
a. It would decrease.
b. It would increase.
c. It would stay the same.
d. It might do any of the above.
Figure 4-19
The diagram below pertains to the demand for turkey in the United States.
Refer to Figure 4-19. All else equal, the approach of Thanksgiving would cause a
move from
a. DA to DB.
b. DB to DA.
c. x to y.
d. y to x.