Sheri, a U.S. citizen, works only in Germany. The value she adds to production in
Germany is included
a. in both German GDP and U.S. GDP.
b. in German GDP, but is not included in U.S. GDP.
c. in U.S. GDP, but is not included in German GDP.
d. in neither German GDP nor U.S. GDP.
In the former Soviet Union, producers were paid for meeting output targets, not for
selling products. Under those circumstances, what were the economic incentives for
producers?
a. to produce good quality products so that society would benefit from the resources
used
b. to conserve on costs, so as to maintain efficiency in the economy
c. to produce enough to meet the output target, without regard for quality or cost
d. to produce those products that society desires most
The GDP deflator for years subsequent to the base year measures the change in
a. nominal GDP from the base year that cannot be attributable to a change in real GDP.
b. real GDP from the base year that cannot be attributable to a change in nominal GDP.
c. nominal GDP from the base year that cannot be attributable to a change in prices.
d. real GDP from the base year that cannot be attributable to a change in prices.
Table 3-14
Assume that Nick and Faldo can switch between producing wheat and producing cloth
at a constant rate.
Refer to Table3-14. Assume that Nick and Faldo each has 2 hours available. If each
person divides his time equally between the production of wheat and cloth, then total
production is
a. 8 bushels of wheat and 15 yards of cloth.
b. 14 bushels of wheat and 27 yards of cloth.
c. 16 bushels of wheat and 30 yards of cloth.
d. 28 bushels of wheat and 34 yards of cloth.
Other things the same, an increase in the U.S. interest rate causes the quantity of
loanable funds supplied to
a. rise because net capital outflow and domestic investment rise.
b. rise because national saving rises.
c. fall because net capital outflow and domestic investment rise.
d. fall because national saving falls.
If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,
a. the real exchange rate is above its purchasing-power parity value. An increase in the
nominal exchange rate can move it back.
b. the real exchange rate is above its purchasing-power parity value. A decrease in the
nominal exchange rate can move it back.
c. the real exchange rate is below its purchasing-power parity value. An increase in the
nominal exchange rate can move it back.
d. the real exchange rate is below its purchasing-power parity value. A decrease in the
nominal exchange rate can move it back.
Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
RefertoTable3-20.What is Theresa’s opportunity cost of producing one bushel of
wheat?
a. 5/6 pound of beef
b. 6/5 pound of beef
c. 3/5 pound of beef
d. 5/3 pounds of beef
The time inconsistency of policy implies that
a. what policymakers say they will do is generally what they will do, but people don’t
believe them because of current policy.
b. when people expect that inflation will be low, it is harder for the Fed to increase
output by increasing the money supply.
c. people will believe Fed policy will be more inflationary than the Fed claims.
d. what policymakers say they will do is usually not what they do, but people believe
them anyway.
The classical dichotomy refers to the separation of
a. prices and nominal interest rates.
b. taxes and government spending.
c. decisions made by the public and decisions made by the government.
d. real and nominal variables.
In the ordered pair (10,30), 10 is the horizontal location of the point and 30 is the
vertical location of the point.
a. True
b. False
Which of the following statements is correct about the relationship between inflation
and interest rates?
a. There is no relationship between inflation and interest rates.
b. The interest rate is determined by the rate of inflation.
c. In order to fully understand inflation, we need to know how to correct for the effects
of interest rates.
d. In order to fully understand interest rates, we need to know how to correct for the
effects of inflation.
If the marginal propensity to consume is 4/5, then a decrease in government spending of
$1 billion decreases the demand for goods and services by $5 billion.
a. True
b. False
An individual would suffer lower losses from an unexpectedly higher inflation rate if
a. she held much currency and owned few bonds.
b. she held much currency and owned many bonds.
c. she held little currency and owned few bonds.
d. she held little currency and owned many bonds.
Assume most athletic apparel bought by U.S. consumers is imported from other nations.
If all else is constant, an increase in the price of foreign-made athletic apparel will
cause the U.S.
a. consumer price index and GDP deflator to increase by exactly the same amount.
b. GDP deflator to increase more than the consumer price index.
c. consumer price index to increase more than the GDP deflator.
d. GDP deflator to decrease less than the consumer price index.
Within the U.S. population, teenagers (ages 16-19) have similar rates of unemployment
than adults of prime working age (ages 25-54), regardless of race or gender.
a. True
b. False
If Alan is risk-averse, then he will always
a. choose notto play a game where he has a 50 percent chance of winning $5 and a 50
percent chance of losing $5.
b. choose notto play a game where he has a 75 percent chance of winning $5 and a 25
percent chance of losing $5.
c. choose to play a game where he has a 55 percent chance of winning $5 and a 45
percent chance of losing$5.
d. All of the above are correct.
GDP is the market value of all final goods and services produced by a country’s citizens
in a given period of time.
a. True
b. False
The principle that “trade can make everyone better off” applies to interactions and trade
between
a. families.
b. states within the United States.
c. nations.
d. All of the above are correct.
Consider the market for portable air conditioners in equilibrium. A summer of
unseasonably cool weather would cause
a. both the equilibrium price and quantity to decrease.
b. both the equilibrium price and quantity to increase.
c. the equilibrium price to increase and the equilibrium quantity to decrease.
d. the equilibrium price to decrease and the equilibrium quantity to increase.
The natural rate of unemployment is the desirable rate of unemployment for an
economy.
a. True
b. False
The National Labor Relations Board
a. enforces antitrust laws against unions.
b. enforces workers’ rights to unionize.
c. acts as a union’s representative in collective bargaining.
d. is required to approve all collective bargaining agreements before they can be
enforced.
An adverse supply shock shifts the short-run Phillips curve right. If people raise their
inflation expectations, the short-run Phillips curve shifts farther right.
a. True
b. False
Figure 2-5
Refer to Figure2-5. The opportunity cost of obtaining 20 additional dryers by moving
from point D to point A is
a. 0 washers.
b. 20 washers.
c. 40 washers.
d. None of the above; the economy cannot move from point D to point A.
A movement to the left along a given short-run Phillips curve could be caused by
a. a reduction in the natural rate of unemployment or expansionary monetary policy.
b. expansionary monetary policy, but not a reduction in the natural rate of
unemployment.
c. either a reduction in the natural rate of unemployment or a contractionary monetary
policy.
d. contractionary monetary policy, but not a reduction in the natural rate of
unemployment.
If the value of a dollar falls, then the quantity of money demanded
a. rises, meaning people want to hold more of their wealth in a liquid form.
b. rises, meaning people desire to work more so their income rises.
c. falls, meaning people want to hold less of their wealth in a liquid form.
d. falls, meaning people want to work less so their income falls.
If the nominal interest rates rises, then the inflation rate must have increased.
a. True
b. False
An decrease in the price of oranges would lead to a(n)
a. increased supply of oranges.
b. increase in the prices of inputs used in orange production.
c. a movement down and to the left along the supply curve for oranges.
d. a movement up and to the right along the supply curve for oranges.
Suppose that a decrease in the price of good X results in fewer units of good Y being
demanded. This implies that X and Y are
a. complementary goods.
b. normal goods.
c. inferior goods.
d. substitute goods.
An import quota imposed by the U.S. would reduce U.S. imports, but have no impact
on U.S. exports.
a. True
b. False
If there is a surplus of loanable funds, then
a. the quantity demanded is greater than the quantity supplied and the interest rate will
rise.
b. the quantity demanded is greater than the quantity supplied and the interest rate will
fall.
c. the quantity supplied is greater than the quantity demanded and the interest rate will
rise.
d. the quantity supplied is greater than the quantity demanded and the interest rate will
fall.
People might withdraw money from interest-bearing accounts,
a. making the interest rate fall, if there is a surplus in the money market.
b. making the interest rate rise, if there is a surplus in the money market.
c. making the interest rate fall, if there is a shortage in the money market.
d. making the interest rate rise, if there is a shortage in the money market.