Government expenditures on capital goods such as roads could increase aggregate
supply. Such effects on aggregate supply are likely to matter more in the short run than
in the long run.
a. True
b. False
Figure 3-17
RefertoFigure3-17.Daisy 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.
Keynes believed that economies experiencing high unemployment should adopt
policies to
a. reduce the money supply.
b. reduce government expenditures.
c. increase aggregate demand.
d. increase aggregate supply.
Local cable television companies frequently are monopolists.
a. True
b. False
People’s skepticism about central bankers’ announcements of their intentions stems
from the fact that policymakers may act in a fashion that is timeinconsistent.
a. True
b. False
When the actual change in the price level differs from its expected change, which of the
following can explain why firms might change their production?
a. both menu costs and mistaking a price level change for a change in relative prices
b. menu costs but not mistaking a price level change for a change in relative prices
c. mistaking a price level change for a change in relative price but not menu costs
d. neither menu costs nor mistaking a price level change for a change in relative prices
When a seller expects the price of its product to decrease in the future, the seller’s
supply curve shifts left now.
a. True
b. False
A rise in the government budget deficit
a. increases the interest rate so in the market for foreign-currency exchange, supply
shifts right.
b. increases the interest rate so in the market for foreign-currency exchange, supply
shifts left.
c. decreases the interest rate so in the market for foreign-currency exchange, supply
shifts left.
d. decreases the interest rate so in the market for foreign-currency exchange supply
shifts right.
If the supply of loanable funds shifts right, then the equilibrium
a. levels of net capital outflow and domestic investment decrease.
b. level of net capital outflow increases and the equilibrium level of domestic
investment decreases.
c. level of net capital outflow decreases and the equilibrium level of domestic
investment increases.
d. levels of net capital outflow and domestic investment increase.
Figure 4-24
The diagram below pertains to the demand for turkey in the United States.
RefertoFigure4-24.All else equal, an increase in the productivity of turkey farmers
would cause a move from
a. DAto DB.
b. DBto DA.
c. x to y.
d. y to x.
Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP
deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP
deflator of 400, and population of 150. What happened to the real GDP per person?
a. It more than doubled.
b. It increased, but it less than doubled.
c. It was unchanged.
d. It decreased.
The dictator of a country requires that companies planning to open or expand must pay
a large fee to file an application one year prior to building new factories or expanding
existing ones. Other things the same, in the long run this requirement would
a. reduce real GDP per person and productivity.
b. reduce real GDP per person but not productivity.
c. reduce productivity but not real GDP per person.
d. None of the above is correct.
A survey which sought the opinion of professional economists on fourteen propositions
about economic policy found that
a. the respondents were almost equally divided on the propositions.
b. the respondents favored the propositions by a slight margin.
c. the respondents disagreed with the propositions by a slight margin.
d. there was overwhelming endorsement of the propositions among the respondents.
Figure27-3
The following figure shows the utility function for Paul.
RefertoFigure27-3. Suppose the vertical distance between the points (0, A) and (0, B)
is 10. If his wealth increased from $700 to $900, then
a. Paul’s utility would increase by less than 10 units.
b. Paul’s utility would increase by more than 10 units.
c. Paul’s utility would increase by exactly 10 units.
d. Any of the above could be correct.
Technological knowledge refers to
a. human capital.
b. available information on how to produce things.
c. resources expended transmitting society’s understanding to the labor force.
d. All of the above are technological knowledge.
Whenever the price of an asset rises above what appears to be its fundamental value,
the market is said to be experiencing a
a. conjectural mistake.
b. fundamental mishap.
c. speculative bubble.
d. temporary inefficiency.
Guns and butter are used to represent the classic societal tradeoff between spending on
a. durable and nondurable goods.
b. imports and exports.
c. national defense and consumer goods.
d. law enforcement and agriculture.
Capital flight raises a country’s interest rate.
a. True
b. False
When the money market is drawn with the value of money on the vertical axis, the price
level increases if
a. money demand shifts right and decreases if money supply shifts right.
b. money demand shifts right and decreases if money supply shifts left.
c. money demand shifts left and decreases if money supply shifts right.
d. money demand shifts left and decreases if money supply shifts left.
When economists talk about growth in the economy, they measure that growth as the
a. absolute change in nominal GDP from one period to another.
b. percentage change in nominal GDP from one period to another.
c. absolute change in real GDP from one period to another.
d. percentage change in real GDP from one period to another.
For a given real interest rate, an increase in the inflation rate reduces the after-tax real
interest rate.
a. True
b. False
Adam Smith developed the theory of comparative advantage as we know it today.
a. True
b. False
Which of the following is notone of the categories into which the Bureau of Labor
Statistics places each adult of each surveyed household?
a. employed
b. unemployed
c. underemployed
d. not in the labor force
An increase in the natural rate of unemployment shifts the long-run Phillips curve to the
right.
a. True
b. False
To increase the money supply, the Fed could
a. sell government bonds.
b. auction more loans to banks.
c. increase the reserve requirement.
d. None of the above is correct.
Nate collected Social Security payments of $220 a month in 1985. If the price index
rose from 90 to 108 between 1985 and 1986, then his Social Security payments for
1986 should have been
a. $228.
b. $238.
c. $257.
d. $264.
The Federal Open Market Committee
a. by law must focus on maintaining low inflation rather than stabilizing output.
b. by law must focus on stabilizing output rather than maintaining low inflation.
c. by law must follow a mechanical rule that takes into account deviations of
unemployment from its natural rate and deviations of inflation from a target.
d. operates with almost complete discretion over monetary policy.
The long-run Phillips curve would shift to the right if
a. the money supply growth rate decreased or if labor markets become more flexible.
b. the money supply growth rate decreased, but not if labor markets become more
flexible.
c. labor markets become more flexible, but not if the money supply growth rate
decreased.
d. None of the above is correct.
An index fund
a. holds only stocks and bonds that are indexed to inflation.
b. holds all the stocks in a given stock index.
c. guarantees a return that follows the index of leading economic indicators.
d. typically has a lower return than a managed fund.
Figure 4-13
RefertoFigure4-13.If Producer A and Producer B are the only producers in the market,
then the market quantity supplied when the price is $2 is
a. 4 units.
b. 6 units.
c. 8 units.
d. 10 units.
The slope of the supply of loanable funds is based on an increase in
a. only national saving when the interest rate rises.
b. both national saving and net capital outflow when the interest rate rises.
c. only national saving when the interest rate falls.
d. both national saving and net capital outflow when the interest rate falls.
Mallard Corporation had a price-earnings ratio of 15, paid a dividend of $3, and
retained earnings of $1 a share. What was the price of a share of Mallard stock?
a. $15
b. $30
c. $45
d. $60.