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. Assume the money market is always in equilibrium. Under the
assumptions of the model,
a. the real interest rate is higher at Y2 than it is at Y1.
b. the quantity of money is the same at Y1 as it is at Y2.
c. the price level is higher at r2 than it is at r1.
d. All of the above are correct.
Real GDP per person is $30,000 in Country A, $20,000 in Country B, and $11,000 in
Country C. Saving per person is $1,000 in all three countries. Other things equal, we
would expect that
a. all three countries will grow at the same rate.
b. Country A will grow the fastest.
c. Country B will grow the fastest.
d. Country C will grow the fastest.
Suppose England exports cars to Australia and imports cheese from Mexico. This
situation suggests that
a. England has a comparative advantage relative to Mexico in producing cheese, and
Australia has a comparative advantage relative to England in producing cars.
b. England has a comparative advantage relative to Australia in producing cars, and
Mexico has a comparative advantage relative to England in producing cheese.
c. England has an absolute advantage relative to Mexico in producing cheese, and
Australia has an absolute advantage relative to England in producing cars.
d. England has an absolute advantage relative to Australia in producing cars, and
Mexico has an absolute advantage relative to England in producing cheese.
Figure 8-11
Refer to Figure 8-11. The deadweight loss of the tax is represented by the
a. length of the line segment connecting points A and B.
b. length of the line segment connecting points A and C.
c. length of the line segment connecting points B and C.
d. area of the triangle bounded by the points A, B, and C.
Figure 3-7
Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier
Refer to Figure 3-7. If Bintu and Juba switch from each person dividing her time
equally between the production of cups and bowls to each person spending all of her
time producing the good in which she has a comparative advantage, then total
production will increase by
a. 1 bowl and 1 cup.
b. 2 bowls and 4 cups.
c. 3 bowls and 5 cups.
d. 4 bowls and 8 cups.
Table 2-3
Production Possibilities for Libraryland
Refer to Table 2-3. What is the opportunity cost to Libraryland of increasing the
production of books from 200 to 300?
a. 100 magazines
b. 150 magazines
c. 200 magazines
d. 350 magazines
At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per
day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral
notebooks per day. Using the midpoint method, the price elasticity of supply is about
a. 1.18.
b. 1.00.
c. 0.85.
d. 0.25.
Table 15-2
2009 Labor Data for Baltivia
Refer to Table 15-2. How many adults were not in Baltivia’s labor force in 2009?
a. 4,400
b. 6,620
c. 7,400
d. 8,690
A decrease in the money supply might indicate that the Fed had
a. purchased bonds in an attempt to increase the federal funds rate.
b. purchased bonds in an attempt to reduce the federal funds rate.
c. sold bonds in an attempt to increase the federal funds rate.
d. sold bonds in an attempt to reduce the federal funds rate.
People will want to hold less money if the price level
a. increases or if the interest rate increases.
b. decreases or if the interest rate decreases.
c. increases or if the interest rate decreases.
d. decreases or if the interest rate increases.
Which of the following always uses prices and quantities from the same period?
a. both nominal and real GDP
b. nominal GDP but not real GDP
c. real GDP but not nominal GDP
d. neither nominal or real GDP
Which of the following sequences best explains the negative slope of the
aggregate-demand curve?
a. price level demand for money equilibrium interest rate
quantity of goods and services demanded
b. price level demand for money equilibrium interest rate
quantity of goods and services demanded
c. price level demand for money equilibrium interest rate
quantity of goods and services demanded
d. price level equilibrium interest rate demand for money
quantity of goods and services demanded
If a tax shifts the supply curve downward (or to the right), we can infer that the tax was
levied on
a. buyers of the good.
b. sellers of the good.
c. both buyers and sellers of the good.
d. We cannot infer anything because the shift described is not consistent with a tax.
In the long run, changes in the money supply affect
a. prices.
b. output.
c. unemployment rates.
d. All of the above.
Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of
groceries in 2006 for $25. If the price index was 38.8 in 1970 and the price index was
180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars?
a. $5.39
b. $25.00
c. $29.11
d. $37.11
In the calculation of the CPI, books are given greater weight than magazines if
a. consumers buy more books than magazines.
b. the price of books is higher than the price of magazines.
c. it costs more to produce books than it costs to produce magazines.
d. books are more readily available than magazines to the typical consumer.
When aggregate demand shifts left along the short-run aggregate supply curve,
a. unemployment and prices rise.
b. unemployment rises and prices fall.
c. unemployment falls and prices rise.
d. unemployment and prices fall.
If aggregate demand shifts right then in the short run
a. firms will increase production. In the long run increased price expectations shift the
short-run aggregate supply curve to the right.
b. firms will increase production. In the long run increased price expectations shift the
short-run aggregate supply curve to the left.
c. firms will decrease production. In the long run increased price expectations shift the
short-run aggregate supply curve to the right.
d. firms will decrease production. In the long run increased price expectations shift the
short-run aggregate supply curve to the left.
Inflation is defined as
a. a period of rising productivity in the economy.
b. a period of rising income in the economy.
c. an increase in the overall level of output in the economy.
d. an increase in the overall level of prices in the economy.
Frictional unemployment is
a. not inevitable; rather, it can be reduced to zero by well-designed public policies.
b. not inevitable; rather, it could be reduced to zero if by the elimination of
unemployment insurance.
c. inevitable, because at any given time, jobs are being created in some firms and
destroyed in other firms.
d. inevitable, because in some industries, wages are always set above the level that
brings supply and demand into equilibrium.
Efficiency wages
a. increase productivity and reduce unemployment.
b. increase productivity but increase unemployment.
c. decrease productivity but reduce unemployment.
d. decrease productivity and increase unemployment.
Average income has been stagnant for many years in
a. Chad.
b. Gabon.
c. Senegal.
d. All of the above are correct.
What is the present value of a payment of $200 to be made one year from today if the
interest rate is 10 percent?
a. $180
b. $181.82
c. $220
d. $222.22
Figure 17-2. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
Refer to Figure 17-2. At the end of 2009 the relevant money-demand curve was the
one labeled MD2. At the end of 2010 the relevant money-demand curve was the one
labeled MD1. Assuming the economy is always in equilibrium, what was the economy’s
approximate inflation rate for 2010?
a. -43 percent
b. -57 percent
c. 57 percent
d. 75 percent
A construction company has built 25 houses so far this year at a total cost to the
company of $7.2 million. If the company builds a 26th house, its total cost will increase
to $7.5 million. Which of the following statements is correct?
a. For the first 25 houses, the average cost per house was $288,000.
b. The marginal cost of the 26th house, if it is built, will be equal to the average cost per
house.
c. If the company can experience a marginal benefit of $288,000 by building the 26th
house, then the company should build it.
d. All of the above are correct.
The federal funds rate is the interest rate that
a. banks charge one another for loans.
b. banks charge the Fed for loans.
c. the Fed charges banks for loans.
d. the Fed charges Congress for loans.
No particular stock is a better buy than any other stock if
a. stock prices are driven by investors’ “animal spirits.”
b. the random-walk theory of stock prices is incorrect.
c. the efficient markets hypothesis is correct.
d. actively managed mutual funds always outperform index funds.
Which of the following changes would decrease the present value of a future payment?
a. a decrease in the size of the payment
b. an increase in the time until the payment is made
c. an increase in the interest rate
d. All of the above are correct.
When ranking movies by nominal box office receipts, what important fact is
overlooked?
a. More people go to movies now than in the past.
b. There are no good substitutes for movies currently.
c. Prices, including those for movie tickets, have been rising over time.
d. Movies and DVD are complements.
Use the (hypothetical) information in the following table to answer the following
questions.
Table 18-2
Refer to Table 18-2. In real terms, U.S. goods are more expensive than goods in which
country(ies)?
a. Bolovia and Morocco
b. Japan, Norway, and Thailand
c. Japan and Norway
d. Thailand