The Fed lowered interest rates in 2001 and 2002. This implies, other things the same,
that the Fed
a. increased the money supply because it was concerned about unemployment.
b. increased the money supply because it was concerned about inflation.
c. decreased the money supply because it was concerned about unemployment.
d. decreased the money supply because it was concerned about inflation.
Economists
a. agree that the costs of moderate inflation are low and that the cost of reducing
inflation is small.
b. agree that the costs of moderate inflation are low, but disagree about the cost of
reducing inflation.
c. disagree about the costs of moderate inflation, but agree that the cost of reducing
inflation is small.
d. disagree about the costs of moderate inflation and disagree about the cost of reducing
inflation.
As the price level rises
a. people will want to hold more money, so the interest rate rises.
b. people will want to hold more money, so the interest rate falls.
c. people will want to hold less money, so the interest rate falls.
d. people will want to hold less money, so the interest rate rises.
Figure 3-5
Hosne’s Production Possibilities Frontier Merve’s Production Possibilities Frontier
Refer to Figure 3-5. Hosne has an absolute advantage in the production of
a. purses and Merve has an absolute advantage in the production of wallets.
b. wallets and Merve has an absolute advantage in the production of purses.
c. both goods and Merve has an absolute advantage in the production of neither good.
d. neither good and Merve has an absolute advantage in the production of both goods.
In January the price of widgets was $1.00, and Wendy’s Widgets produced 80 widgets.
In February the price of widgets was $1.50, and Wendy’s Widgets produced 110
widgets. In March the price of widgets was $2.00, and Wendy’s Widgets produced 140
widgets. The price elasticity of supply of Wendy’s Widgets was about
a. 0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased
from $1.50 to $2.00.
b. 1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased
from $1.50 to $2.00.
c. 0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased
from $1.50 to $2.00.
d. 1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased
from $1.50 to $2.00.
If people decide to hold more currency relative to deposits, the money supply
a. falls. The Fed could lessen the impact of this by buying Treasury bonds.
b. falls. The Fed could lessen the impact of this by selling Treasury bonds.
c. rises. The Fed could lessen the impact of this by buying Treasury bonds.
d. rises. The Fed could lessen the impact of the by selling Treasury bonds.
A favorable supply shock will cause the price level
a. and output to rise.
b. and output to fall.
c. to rise and output to fall.
d. to fall and output to rise.
A bond buyer is a
a. saver. Long term bonds have less risk than short term bonds.
b. saver. Long term bonds have more risk than short term bonds.
c. borrower. Long term bonds have less risk than short term bonds..
d. borrower. Long term bonds have more risk than short term bonds.
Suppose a basket of goods and services has been selected to calculate the CPI and 2002
has been selected as the base year. In 2002, the basket’s cost was $50; in 2004, the
basket’s cost was $52; and in 2006, the basket’s cost was $54.60. The value of the CPI
in 2004 was
a. 96.2.
b. 102.0.
c. 104.0.
d. 152.0.
Figure 14-1. The figure shows a utility function.
Refer to Figure 14-1. Let 0A represent the distance between the origin and point A; let
AB represent the distance between point A and point B; etc. Which of the following
ratios best represents the marginal utility per dollar when wealth increases from $400 to
$600?
a.
b.
c.
d.
Imagine that two years ago you inherited $20,000 and put it into an account paying a
fixed 8 percent annual interest rate. How much money do you have in your account
now?
a. $22,880.00
b. $23,200.00
c. $23,232.00
d. $23,328.00
According to the Phillips curve, policymakers would reduce inflation but raise
unemployment if they
a. decreased the money supply.
b. increased government expenditures.
c. decreased taxes.
d. None of the above is correct.
In theory the severity of recessions can be diminished with
a. an increase in government spending, which the political process cannot delay.
b. an increase in government spending, which the length of the political process can
delay.
c. a decrease in government expenditures, which the political process cannot delay.
d. a decrease in government spending, which the length of the political process can
delay.
The opportunity cost of going to college is
a. the total spent on food, clothing, books, transportation, tuition, lodging, and other
expenses.
b. the value of the best opportunity a student gives up to attend college.
c. zero for students who are fortunate enough to have all of their college expenses paid
by someone else.
d. zero, since a college education will allow a student to earn a larger income after
graduation.
Inefficiency exists in an economy when a good is
a. not being consumed by buyers who value it most highly.
b. not distributed fairly among buyers.
c. not produced because buyers do not value it very highly.
d. being produced with less than all available resources.
The future value of a deposit in a savings account will be smaller
a. the longer a person waits to withdraw the funds.
b. the lower the interest rate is.
c. the larger the initial deposit is.
d. All of the above are correct.
In the ordered pair (17, 75), 17 is the
a. vertical location of the point.
b. the slope.
c. the x-coordinate.
d. the y-coordinate.
Fiona’s Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when
it raised the price of tropical fish from $5 to $9. The price elasticity of demand for
Fiona’s Fish Emporium is
a. 0.57.
b. 0.70.
c. 1.43.
d. 2.20.
Figure 21-2. On the left-hand graph, MS represents the supply of money and MD
represents the demand for money; on the right-hand graph, AD represents aggregate
demand. The usual quantities are measured along the axes of both graphs.
.
Refer to Figure 21-2. As we move from one point to another along the money-demand
curve MD1,
a. the price level is held fixed at P1.
b. the interest rate is held fixed at r1.
c. the money supply is changing so as to keep the money market in equilibrium.
d. the expected inflation rate is changing so as to keep the real interest rate constant.
Danielle did not work last week because flooding forced an evacuation of her
workplace. The Bureau of Labor Statistics counts Danielle as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.
Which of the following transactions does not take place in the markets for factors of
production in the circular-flow diagram?
a. a landowner leases land to a farmer
b. a farmer hires a teenager to help with harvest
c. a construction company rents trucks for its business
d. a woman buys corn for dinner
If the nominal interest rate is 8 percent and the real interest rate is 3.5 percent, then the
inflation rate is
a. -4.5 percent.
b. 0.78 percent.
c. 4.5 percent.
d. 11.5 percent.
A country has a trade deficit. Its
a. net capital outflow must be positive, and saving is larger than investment.
b. net capital outflow must be positive and saving is smaller than investment.
c. net capital outflow must be negative and saving is larger than investment.
d. net capital outflow must be negative and saving is smaller than investment.
Economists regard events from the past as
a. irrelevant, since history is unlikely to repeat itself.
b. of limited interest, since those events seldom provide any useful economic data.
c. interesting but not particularly valuable, since those events cannot be used to evaluate
present-day economic theories.
d. interesting and valuable, since those events are capable of helping us to understand
the past, the present, and the future.
By far the largest category of goods and services in the CPI basket is
a. housing.
b. transportation.
c. education & communication.
d. food & beverages.
Figure 5-9
Refer to Figure 5-9. Suppose this demand curve is a straight, downward-sloping line
all the way from the horizontal intercept to the vertical intercept. We choose two prices,
P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of
calculating the price elasticity of demand. Also suppose P2 >P1. In which of the
following cases could we possibly find that (i) demand is elastic and (ii) an increase in
price from P1 to P2 causes an increase in total revenue?
a. 0 < P1 < P2 < $10.
b. $10 < P1 < P2 < $15.
c. P1 > $15.
d. None of the above is correct.
Other things the same, if a country raises its saving rate, when is growth of real GDP
per person higher?
a. as the economy moves toward the long run and in the long run.
b. as the economy moves toward the long run, but not in the long run.
c. in the long run, but not as the economy moves toward the long run.
d. neither as the economy moves toward the long run, nor in the long run.
Consumer surplus
a. is the amount a buyer pays for a good minus the amount the buyer is willing to pay
for it.
b. is represented on a supply-demand graph by the area below the price and above the
demand curve.
c. measures the benefit sellers receive from participating in a market.
d. measures the benefit buyers receive from participating in a market.
Reserves increase if the Federal Reserve
a. raises the discount rate or auctions more credit.
b. raises the discount rate but not if it auctions more credit.
c. lowers the discount rate or auctions more credit.
d. lowers the discount rate but not if it auctions more credit.
Which of the following is not an argument in favor of requiring the government to
balance its budget?
a. Government debt imposes higher taxes or more borrowing on future generations.
b. A balanced budget will smooth the business cycle.
c. Deficits lower national saving.
d. Recent history shows that Congress will run deficits even when deficits are not
justified by war or recession.
If the U.S. real exchange rate appreciates, U.S. exports
a. increase and U.S. imports decrease.
b. decrease and U.S. imports increase.
c. and U.S. imports both increase.
d. and U.S. imports both decrease.
Changes in nominal GDP reflect
a. only changes in prices.
b. only changes in the amounts being produced.
c. both changes in prices and changes in the amounts being produced.
d. neither changes in prices nor changes in the amounts being produced.
Table 13-1
Refer to Table 13-1. Which firm had the P/E ratio that was closest to the historically
typical P/E ratio?
a. GenMills
b. Gillette
c. Graco
d. Hershey
Sticky wages leads to a positive relationship between the actual price level and the
quantity of output supplied in
a. both the short and long run.
b. the short run, but not the long run.
c. the long run, but not the short run.
d. neither the short nor the long run.
When we say that economic fluctuations are “irregular and unpredictable,” we mean
that
a. the relationship between output and unemployment is erratic and difficult to
characterize.
b. when one macroeconomic variable that measures income or spending is falling, other
macroeconomic variables that measure income or spending are likely to be rising.
c. recessions do not occur at regular intervals.
d. All of the above are correct.