If the United States exports $500 of goods and services and imports $700 of goods and
services, net exports are $1,200.
A) True
B) False
Figure: Demand and Supply
Look at the figure Demand and Supply. The slope of the curve labeled S is:
A) “1.
B) 0.
C) 1.
D) 3.
The three main monetary policy tools are:
A) interest rates, taxes, and government purchases.
B) currency, near-moneys, and reserve ratio.
C) deposit insurance, discount rate, and money multiplier.
D) reserve requirements, the discount rate, and open-market purchases.
A recessionary gap will be eliminated because there is _____ pressure on wages,
shifting the _____.
A) downward; short-run aggregate supply curve rightward
B) downward; short-run aggregate supply curve leftward
C) downward; aggregate demand curve downward
D) upward; aggregate demand curve leftward
Scenario: Closed Economy S= I
GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and
government spending is $2 trillion. Taxes are $0.5 trillion.
Look at the scenario Closed Economy S = I. How much is national saving?
A) $3.5 trillion
B) $3 trillion
C) $2.5 trillion
D) $2 trillion
If the exchange rate is $1 = 12.95 Mexican pesos, then the price of a $10,000 Harley
Davidson motorcycle is _____ pesos in Mexico.
A) 10,000
B) 772.2
C) 12,950
D) 129,500
Scenario: Exchange Rates
The value of a euro goes from US$1.25 to US$1.50.
Look at the scenario Exchange Rates. French exports to the United States will:
A) be cheaper.
B) be more expensive.
C) be unaffected.
D) increase.
Debit cards:
A) are considered part of the money supply, since they allow access to a part of the
money supply.
B) are not generally accepted as a medium of exchange.
C) are less liquid than stocks and bonds.
D) are a liability for the user of the card.
Scenario: Gizmovia II
The Republic of Gizmovia wants to maintain the exchange rate of its currency, the
gizmo, at $0.50, but the current exchange rate for the gizmo is $0.75.
Look at the scenario Gizmovia II. If Gizmovia uses monetary policy to bring the
exchange rate for the gizmo to $0.50, it should _____ interest rates, which will _____
capital inflows of gizmos.
A) decrease; decrease
B) decrease; increase
C) increase; increase
D) increase; decrease
Figure: Expanded Circular-Flow Model
Look at the figure Expanded Circular-Flow Model. Which of the following is NOT a
sector of the economy shown in the circular-flow model?
A) households
B) firms
C) the rest of the world
D) factor markets
Figure: The Production Possibilities for Two Countries
Look at the figure The Production Possibilities for Two Countries. If Indonesia and
Malaysia trade 1 radio for 1.5 tires, the most that Indonesia can consume is _____
radios and _____ tires, while the most that Malaysia can consume is _____ radios and
_____ tires.
A) 300; 600; 800; 200
B) 1,200; 400; 800; 200
C) 400; 600; 1,200; 600
D) 600; 600; 600; 600
A fixed rate can be expensive because it requires that a country keep large amounts of
foreign currency on handusually a low-return investment.
A) True
B) False
Look at the table Coffee and Salmon Production Possibilities II. This table shows the
maximum amounts of coffee and salmon, both measured in pounds, that Brazil and
Alaska can produce if they just produce one good. Alaska has an absolute advantage in
producing:
A) coffee only.
B) salmon only.
C) both coffee and salmon.
D) neither coffee nor salmon.
Deposit insurance:
A) can increase the possibility of bank runs.
B) often makes banks more accountable for their actions and less likely to engage in
risky behavior.
C) essentially serves the same function as a fractional reserve system.
D) leads depositors to be less inclined to monitor bank operations.
The purpose of the Consumer Financial Protection Bureau is to:
A) guarantee the safety of food and drugs purchased by consumers.
B) educate consumers on how to save for retirement above and beyond their Social
Security.
C) police financial industry practices and protect borrowers.
D) help consumers understand how to get the best health insurance.
Classical economists believe that:
A) the long-run aggregate supply curve is vertical, but the short-run aggregate supply
curve is horizontal.
B) fiscal policy changes are best at controlling the business cycle.
C) increases in the money supply will increase output.
D) prices are flexible.
Figure: The Production Possibilities for Two Countries
Look at the figure The Production Possibilities for Two Countries. Trade will NOT take
place if 1 radio trades for:
A) 0.25 tire.
B) 1 tire.
C) 1.5 tires.
D) 1.75 tires.
Scenario: Productivity
The economy has grown by 4% per year over the past 30 years. During the same period
the labor force has grown by 1% per year and the quantity of physical capital has grown
by 5% per year. Each 1% increase in physical capital per worker is estimated to
increase productivity by 0.4%. Assume that human capital has not changed during the
past 30 years. Look at the scenario Productivity. What is the growth rate of
productivity?
A) 5%
B) 4%
C) 3%
D) 1.6%
If a country’s currency appreciates, all other things equal, its exports will decrease and
its imports will increase.
A) True
B) False
Figure: Shifts of the AD”ASCurves
Look at the figure Shifts of the AD”AS Curves. A short run increase in net exports is
illustrated by:
A) panel (a).
B) panel (b).
C) panel (c).
D) panel (d).
Profit per unit equals:
A) price per unit minus cost per unit.
B) price per unit divided by cost per unit.
C) cost per unit minus price per unit.
D) price per unit minus the nominal wage rate.
Investment spending in macroeconomics refers to:
A) buying stocks.
B) buying newly issued shares of stock.
C) adding to physical capital.
D) adding to one’s retirement account.
Table: Unemployment and Employment Data
Look at the table Unemployment
and Employment Data. The unemployment rate for this economy is:
A) 2.9%.
B) 4.8%.
C) 5%.
D) 5.3%.
Figure: Four Markets for DVDs
Look at the figure Four Markets for DVDs. Which of the graphs illustrates what may
happen in the market for DVDs if D1 or S1 is the original curve and D2 or S2 is the new
curve and if the cost of producing DVDs falls?
A) A
B) B
C) C
D) D
All children have to be immunized against polio, measles, mumps, and other diseases.
If you don’t have enough money to pay for the immunizations, they will be provided
free at the county health clinic. This statement best represents this economic concept:
A) People usually exploit opportunities to make themselves better off.
B) Resources should be used as efficiently as possible to achieve society’s goals.
C) When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
D) Government policies can change spending.
According to the information in the table Calculating GDP, what is GDP?
A) $47,475
B) $12,200
C) $21,485
D) $34,085
Which of the following demonstrates one of the three principles of economy-wide
interactions?
A) A student chooses to rent a movie with friends rather than study for an economics
quiz.
B) Your roommate offers to pay for the movie tickets if you drive to the theater.
C) A city builds a new public park on the grounds of an abandoned warehouse.
D) In 2008, fearing a recession, Congress approved a White House proposal to rebate
some taxes for 2007.
Which of the following statements is FALSE?
A) Efficiency exists when an economy realizes the maximum possible gains from trade
given the available resources.
B) If an economy is efficient, it is possible to make only a few people better off without
reducing other individuals’ economic welfare.
C) Economic efficiency exists when all opportunities to make people better off have
been fully exploited.
D) Markets usually lead to efficiency.
In the circular-flow diagram households receive money for _____ in the _____ market.
A) producing and selling goods and services; product
B) selling resources; product
C) selling resources; factor
D) selling goods and services; factor
Economic growth is likely to entail:
A) a reduction in investment.
B) a decrease in the capital stock.
C) higher saving.
D) lower saving.
Figure: AD”ASModel I
Look at the figure AD”AS Model I. If the economy is at point X, the appropriate fiscal
policy is to:
A) increase taxes and decrease government spending.
B) decrease taxes and increase government spending.
C) increase the money supply and interest rates.
D) decrease the money supply and interest rates.