If the growth rate of money changes, there will be no long-run effects on real interest
rates.
A decrease in supply will cause the equilibrium price and quantity of a good to fall.
Countries that devote a large share of GDP to investment tend to have high growth
rates.
Credit cards are regularly used in economic exchanges, so credit card balances are
included in the definition of money.
We use interest rates to measure the opportunity cost of holding money.
If prices are sticky, output in an economy will be mostly determined by the level of
demand.
The consumption tax in Japan in 1997 was primarily due to high inflation.
Recall Application 1, “The Chinese Yuan and Big Macs,” to answer the following
questions:
If a basket of goods costs 2 dollars in the United States and 10 euros in France, the
theory of purchasing power parity states that the nominal exchange rate should be 5
euros per dollar.
Microeconomics is the study of aggregate behavior in the economy.
A market failure occurs when companies defraud the public.
A decrease in capital/labor ratio enhances economic growth.
The market demand curve shows the relationship between the price and the quantity
demanded by all consumers, everything else being equal.
Absolute advantage occurs when one producer has greater productivity compared to
another producing the same product.
Let C= 40 + 0.8y and I = 10. Autonomous consumption is
A) 10.
B) 32.
C) 40.
D) 50.
A situation in which a country does not trade with another country is called:
A) autarky.
B) free trade.
C) comparative advantage.
D) specialization.
Recall Application 4, “The Locomotive Effect: Why Do Foreign Demand Affects a
Country’s Output,” to answer the following questions:
According to the application, economic growth in the U.S. will:
A) increase other countries’ exports.
B) decrease other countries’ imports.
C) increase other countries’ imports
D) have no effect on other countries’ exports or imports.
Assume the stock of capital is held constant. Table 7.1
Table 7.1 exemplifies the principle of
A) real vs. nominal costs.
B) marginal costs.
C) diminishing returns.
D) full employment equilibrium.
In the short run, decreases in the growth rate of the money supply will ________
nominal rates of interest and ________ real rates of interest.
A) decrease; increase
B) increase; decrease
C) decrease; decrease
D) increase; increase
Which of the following is not a motive for holding money?
A) the transaction motive
B) the liquidity motive
C) the speculative motive
D) the inflation motive
The concerns of macroeconomics include all of the following except:
A) consumer prices.
B) gross domestic output.
C) the structure of the U.S. steel industry.
D) the unemployment rate.
The difficulty with enforcing anti-dumping laws is that predatory pricing is difficult to
determine if the lower price is due to:
A) price discrimination.
B) higher costs.
C) firm generosity.
D) economies of scale.
Figure 4.7 If demand and supply decrease in Figure 4.7, then the equilibrium:
A) price rises.
B) price falls.
C) quantity rises.
D) quantity falls.
If the U.S. government enters the foreign exchange market and sells dollars to maintain
a specific exchange rate with the yen, the dollar will ________ and the yen will
________.
A) depreciate; depreciate
B) depreciate; appreciate
C) appreciate; depreciate
D) appreciate; appreciate
In ________, monetary policy can change the level of output.
A) the long run only
B) both the short run and the long run
C) neither the short run nor the long run
D) the short run only
Suppose that in the United States people begin to spend a smaller fraction of their
income on imports. This would cause the multiplier to:
A) decrease.
B) increase.
C) remain unchanged.
D) either increase or decrease depending on the value of the MPC.
In the long run, increases in the growth rate of the money supply will ________
nominal rates of interest and ________ real rates of interest.
A) increase; decrease
B) decrease; decrease
C) increase; not affect
D) decrease; not affect
The opportunity cost of going to college:
A) is zero if your parents pay your tuition.
B) is equal to the cost of tuition, room and board, and other expenses.
C) includes wages you lose by going to school instead of working.
D) is the same for all students at a particular school who pay full tuition.
Explain how deposit insurance contributed indirectly to the savings and loan crisis of
the 1980s.
How are percentage changes calculated?
Growth accounting is a method which measures the contributions to economic growth
from what three factors?
Explain why “good news for the economy is bad news for bond prices.”
Identify the determinants of the demand for money.
In the Solow Model, will a country choose a saving rate of 100 %? Why or why not?
Describe how adjustments in wages and prices take the economy from the short-run
equilibrium to the long-run equilibrium.
Explain what will happen to the equilibrium price and quantity of satellite TV service if
the wages of the workers who provide the satellite TV service increase while at the
same time the price of cable television service (a substitute for satellite TV service) also
increases.
Explain why budget deficits are very sensitive to the state of the economy.