Daily Output of Japan and U.S.
Table 18.2 Refer to Table 18.2. Japan has a comparative
advantage in the production of:
A) stereos.
B) tractors.
C) both stereos and tractors.
D) neither stereos nor tractors.
If the economy is experiencing 50 percent inflation per month, then a donut that costs
$1.50 today will cost ________ next month.
A) $2.25
B) $1.00
C) $2.00
D) $1.75
The expectations Phillips curve shows the inverse relationship between inflation and
unemployment when:
A) we take into account expectations of inflation.
B) the economy experiences high inflation.
C) the economy experiences no inflation.
D) the unemployment rate is above the natural rate.
Suppose that the chain-weighted index for GDP in Panama was 180 in 2011 and 188 in
2012. The inflation rate between those two years was approximately
A) 1.1 percent.
B) 4.4 percent.
C) 8 percent.
D) 10.4 percent.
Figure 19.3 Refer to Figure 19.3. The market for yen is currently at Point A. An
increase in the U.S. interest rates causes the equilibrium to move to point ________ and
the U.S. dollar will ________.
A) C; appreciate
B) A; appreciate
C) B; depreciate
D) D; appreciate
According to the growth version of the quantity equation, a 4% increase in the money
supply (holding velocity constant) causes a 2% increase in prices only if:
A) real GDP increases by 2 percent.
B) nominal GDP increases by 2 percent.
C) real GDP decreases by 2 percent.
D) nominal GDP decreases by 2 percent.
Which of the following will cause output to increase in the long run?
A) a decrease in the money supply
B) an increase in income taxes
C) a decrease in government spending
D) None of the above will increase output in the long run.
Traveler’s checks are:
A) included only in M1.
B) included in M2.
C) not included in M2.
D) not included in M1.
As depicted in the circular flow diagram, firms
A) demand the goods and services that households supply in product markets.
B) supply the goods and services that households demand in product markets.
C) demand the resources that households supply in product markets.
D) supply the resources that households demand in factor markets.
An unemployed individual decides to spend the day fishing. The opportunity cost of
fishing is
A) the cost of bait and any other monetary expenses.
B) zero, because the person doesn’t have a job.
C) the cost of bait, any other monetary expenses, and the value of the individual’s wages
while he was working.
D) the cost of bait, any other monetary expenses, and the value of the best alternative
use of the individual’s time.
If a consumer can buy four pizzas for $24 and five pizzas for $25, then the marginal
cost of the fifth pizza is:
A) $25.
B) $5.
C) $6.
D) $1.
You borrow money to buy a house in 2006 at a fixed interest rate of 6.5%. By 2009, the
inflation rate has risen to 8.5%. Considering only your mortgage, is inflation good news
or bad news for you?
A) bad news, because inflation hurts everyone
B) bad news, because it makes the real value of your mortgage payments increase
C) good news, because it makes the real value of your mortgage payments decrease
D) bad news, because it makes the nominal value of your mortgage payments increase
Figure 9.1
Refer to Figure 9.1. A reduction in government spending causes:
A) the economy to move from Point A to Point B, but will not shift the aggregate
demand curve.
B) the aggregate demand curve to shift from to .
C) the aggregate demand curve to shift from to .
D) neither a shift of the aggregate demand curve nor a change in real GDP.
Recall Application 1, “How to Fight a Liquidity Trap,” to answer the following
questions:
According to the Application, why would the purchase of long term bonds help spur the
economy?
A) It would raise inflation and lower real interest rates.
B) It would lower inflation and the real interest rate.
C) It would raise inflation and the real interest rate.
D) It would lower inflation and raise the real interest rate.
Suppose that for a given year money growth is 5 percent, real GDP growth is 2 percent,
and the inflation rate is 5 percent. According to the growth version of the quantity
equation, velocity growth would be
A) 0 percent.
B) 2 percent.
C) 8 percent.
D) 12.5 percent.