The term hyperinflationrefers to
a. the spread of inflation from one country to others.
b. a decrease in the inflation rate.
c. a period of very high inflation.
d. inflation accompanied by a recession.
At the equilibrium real interest rate in the open-economy macroeconomic model, the
equilibrium quantity of loanable funds equals
a. net capital outflow.
b. domestic investment.
c. foreign currency supplied.
d. national saving.
If the number of Japanese yen a dollar buys falls, but neither country’s price level
changes, then the real exchange rate
a. depreciates which causes U.S. net exports to increase.
b. depreciates which causes U.S. net exports to decrease.
c. appreciates which causes U.S. net exports to increase.
d. appreciates, which causes U.S. net exports to decrease.
Figure 2-2
Refer to Figure2-2. If households are buyers in the markets represented by Box C of
this circular-flow diagram, then
a. Box C must represent the markets for the factors of production.
b. Box D must represent the markets for goods and services.
c. firms are sellers in the markets represented by Box C.
d. All of the above are correct.
In a perfectly competitive market, the goods offered for sale are all exactly the same.
a. True
b. False
Table 28-6
RefetoTable28-6. What is the U-4 measure of labor underutilization?
a. 6.5%
b. 6.9%
c. 7.0%
d. 17.9%
Suppose that over the last year the price of copper increased from $1.70 a pound to
$1.79 per pound. Over the same time a measure of the overall price level increased
from 300 to 309. The price of copper increased by
a. less than inflation, and this means it became relatively less scarce.
b. less than inflation, and this means it became scarcer.
c. more than inflation, and this means it became scarcer.
d. more than inflation, but this doesn”t necessarily mean that it become scarcer.
An increase in a country’s budget deficit
a. increases net capital outflow, so the demand for its currency in the market for
foreign-currency exchange shifts right.
b. increases net capital outflow, so the supply of its currency in the market for
foreign-currency exchange shifts right.
c. decreases net capital outflow, so the demand for its currency in the market for
foreign-currency exchange shifts left.
d. decreases net capital outflow, so the supply of its currency in the market for
foreign-currency exchange shifts left.
Monetary Policy in Flosserland
In Flosserland, the Department of Finance is responsible for monetary policy.
Flosserland has had an inflation rate of 25% for many years.
RefertoMonetaryPolicyinFlosserland.Suppose that the Flosserland Department of
Finance has run a public relations campaign claiming it will reduce inflation to 12.5%
and that it actually reduces inflation to that level. Suppose that the public had expected
that the Department of Finance would reduce inflation but only to 22%. Then
a. unemployment falls, but it would have fallen more if people had been expecting
12.5% inflation.
b. unemployment falls, but it would have fallen more if people had been expecting 25%
inflation.
c. unemployment rises, but it would have risen more if people had been expecting
12.5% inflation.
d. unemployment rises, but it would have risen more if people had been expecting 25%
inflation.
Which of the following is nota cost of inflation identified by economists?
a. menu costs associated with more frequent adjustment of prices
b. confusion and inconvenience resulting from a changing value of the unit of account
c. reduced price flexibility
d. arbitrary redistributions of wealth associated with dollar-denominated debts
Which of the following characteristics is required for a perfectly competitive market?
a. The goods offered for sale are exactly the same.
b. There are so many buyers and sellers that no single buyer or seller has any influence
over the market price.
c. It is difficult for new sellers to enter the market.
d. Both a and b are correct.
A normative economic statement such as “The minimum wage should be abolished”
a. would likely be made by an economist acting as a scientist.
b. would require values and data to be evaluated.
c. would require data but not values to be evaluated.
d. could not be evaluated by economists acting as policy advisers.
Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price
index was 177 in 2001 and 221.25 in 2006. Ruben’s 2001 salary in 2006 dollars is
a. $75,000; thus, Ruben’s purchasing power increased between 2001 and 2006.
b. $75,000; thus, Ruben’s purchasing power decreased between 2001 and 2006.
c. $85,000; thus, Ruben’s purchasing power increased between 2001 and 2006.
d. $85,000; thus, Ruben’s purchasing power decreased between 2001 and 2006.
A country’s saving is greater than its domestic investment. This difference means that its
a. net capital outflow and net exports are positive.
b. net capital outflow and net exports are negative.
c. net capital outflow is positive and net exports are negative.
d. net capital outflow is negative and net exports are positive.
Macroeconomics is the study of the economy as a whole.
a. True
b. False
Suppose that a country increased its saving rate. In the long run it would have
a. higher productivity, and another unit of capital would increase output by more than
before.
b. higher productivity, but another unit of capital would increase output by less than
before.
c. lower productivity, and another unit of capital would increase output by more than
before.
d. lower productivity, but another unit of capital would increase output by less than
before.
An increase in a country’s population may contribute to the rate of technological
progress because a larger population
a. forces the capital stock to be spread more thinly.
b. forces natural resources to be spread more thinly.
c. brings with it more scientists, inventors, and engineers.
d. brings with it more favorable recognition from other countries.
If expected inflation is constant and the nominal interest rate decreases by 2 percentage
points, then the real interest rate
a. increases by 2 percentage points.
b. increases, but by less than 2 percentage points.
c. decreases, but by less than 2 percentage points.
d. decreases by 2 percentage points.
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.
Other things the same, when an economy increases its saving rate
a. consumption and production rise now.
b. consumption rises now and production rises later
c. consumption falls now and production rises later.
d. consumption falls now and production falls later.
In the summer of 2008, consumers indicated that they were less optimistic about the
future of the economy. Such a change in sentiment is likely to
a. shift aggregate demand to the left.
b. increase output.
c. decrease unemployment.
d. increase prices.
An understanding of the best ways to produce goods and services is called
a. human capital.
b. physical capital.
c. technology.
d. productivity.
Suppose that over the past year, the real interest rate was 6 percent and the inflation rate
was 4 percent. It follows that
a. the dollar value of savings increased at 6 percent, and the purchasing power of
savings increased at 2 percent.
b. the dollar value of savings increased at 6 percent, and the purchasing power of
savings increased at 10 percent.
c. the dollar value of savings increased at 10 percent, and the purchasing power of
savings increased at 2 percent.
d. the dollar value of savings increased at 10 percent, and the purchasing power of
savings increased at 6 percent.
Suppose that Congress were to institute an investment tax credit. What would happen in
the market for loanable funds?
a. The demand for loanable funds would shift left.
b. The supply of loanable funds would shift left.
c. The demand for loanable funds would shift right.
d. The supply of loanable funds would shift right.
In response to a decrease in output, the economy would revert to its original level of
prices and output whether the decrease in output was caused by a decrease in aggregate
demand or a decrease in short-run aggregate supply.
a. True
b. False
Of the following groups, who is eligible for unemployment insurance benefits?
a. the unemployed who quit their jobs
b. the unemployed who were laid off because their previous employers no longer
needed their skills
c. the unemployed who were fired for cause
d. the unemployed who just entered the labor force
If the Apple corporation sells a bond it is
a. borrowing directly from the public.
b. borrowing indirectly from the public.
c. selling shares of ownership directly to the public.
d. selling shares of ownership indirectly to the public.
The amount of unemployment varies
a. little over time and across countries.
b. little over time but substantially across countries.
c. substantially over time but little across countries.
d. substantially over time and across countries.
Which of the following are effects of an increase in government spending financed by a
tax increase?
a. the tax increase reduces consumption; the change in the interest rate reduces
residential construction
b. the tax increase reduces consumption; the change in the interest rate raises residential
construction
c. the tax increase raises consumption; the change in the interest rate reduces residential
construction
d. the tax increase raises consumption; the change in the interest rate reduces residential
construction
From 1960 to about 1980 the net capital outflow of the U.S. was typically
a. small but always positive.
b. small and sometimes negative and sometimes positive.
c. large and positive.
d. large but sometimes negative and sometimes positive.
Menu costs help explain
a. sticky-price theory.
b. misperceptions theory.
c. sticky-wage theory.
d. All of the above are correct.