Recall Application 2, “Two Approaches to Determining the Causes of Recessions,” to
answer the following questions:
According to the application, a recession is likely to be caused by a decrease in
aggregate supply if:
A) prices change but output does not change in the long run.
B) both prices and output change in the long run.
C) both prices and output do not change in the long run.
D) prices do not change but output changes in the long run.
From the Application, which of the following would we observe in the market for
pecans as a result of an increase in the demand for pecans?
A) higher equilibrium price and equilibrium quantity of pecans
B) higher equilibrium price and equilibrium quantity of pecan pies
C) lower equilibrium price and equilibrium quantity of pecans
D) higher equilibrium price and lower equilibrium quantity of pecans
To end hyperinflation, the government must first:
A) eliminate the budget deficits.
B) be replaced.
C) eliminate the use of money.
D) eliminate tax collection.
In the short run, the primary determinant of output of firms is the:
A) level of prices.
B) future price.
C) availability of inputs.
D) level of demand.
Refer to Figure 18.4. With free trade, what is the equilibrium quantity of gloves in
Duckland?
A) 100
B) 80
C) 60
D) 40
Refer to Figure 15.1. At point
A) GDP is above potential output.
B) GDP is below potential output.
C) unemployment is above the natural rate.
D) the economy is in long-run equilibrium.
Suppose the capital stock is currently at 10,000. If gross investment is 500 and
depreciation is 1000, then the capital stock at the end of the period is:
A) 9500.
B) 11000.
C) 11500.
D) 10500.
Recall Application 1, “Money with Faces of Rodents,” to answer the following
questions:
Based on what you learned from the Application, what function of money would the
capivari fail to perform?
A) None. It would perform all functions.
B) store of value
C) medium of exchange.
D) unit of account
Refer to Figure 4.1, which shows Molly’s and Ryan’s individual demand curves for
compact discs per month. Assuming Molly and Ryan are the only consumers in the
market, what is the market quantity demanded at a price of $3?
A) 6
B) 9
C) 15
D) 20
If the Fed follows a policy of targeting the inflation rate:
A) its credibility will be lowered.
B) the natural rate of unemployment will rise.
C) it will likely face fewer political pressures.
D) the automatic stabilizers will not work.
The rate at which one currency can be traded for another is called the
A) terms of trade.
B) transfer rate.
C) exchange rate.
D) coupon rate.
Figure 2.2
Figure 2.2 presents a production possibilities curve for a country that can either produce
highways or provide people with medical care in a given year. The opportunity cost of
the fourth new highway built in a year is:
A) less than the opportunity cost of the third new highway.
B) the same as the opportunity cost of the third new highway.
C) greater than the opportunity cost of the third new highway.
D) the sum of the opportunity costs of the first three highways built.
If a bond has a promised value next year of $2100 and the interest rate is 5 percent, then
the price of a bond today is:
A) $105.
B) $2000.
C) $2205.
D) $2105.
Fiscal policy affects the real interest rate through its impact on:
A) real GDP and money supply.
B) real GDP and money demand.
C) money supply and money demand.
D) money supply and the price level.