What does the Fed auction at the Term-Auction Facility?
a. government bonds of a quantity it sets
b. government bonds with the quantity determined at the auction
c. loans of a quantity it sets
d. loans with the quantity determined at the auction
An adverse supply shock shifts the short-run Phillips curve to the
a. right. This means the unemployment rate is higher at each inflation rate.
b. right. This means the unemployment rate is lower at each inflation rate.
c. left. This means the unemployment rate is higher at each inflation rate.
d. left. This means the unemployment rate is lower at each inflation rate.
Which of the following is not included in either M1 or M2?
a. U.S. Treasury bills
b. small time deposits
c. demand deposits
d. money market mutual funds
Which of the following are both correct?
a. Data show no correlation between saving and measures of economic well-being. A
reduction in tax rates may reduce saving because of the income effect.
b. Data show no correlation between saving and measures of economic well-being. A
reduction in tax rates may reduce saving because of the substitution effect.
c. Data show a positive correlation between saving and measures of economic
well-being. A reduction in tax rates may reduce saving because of the income effect.
d. Data show a positive correlation between saving and measures of economic
well-being. A reduction in tax rates may reduce saving because of the substitution
effect.
Figure 7-20
Refer to Figure 7-20. At equilibrium, consumer surplus is
a. $36.
b. $72.
c. $108.
d. $144.
Figure 6-7
Refer to Figure 6-7. Which of the following price controls would cause a shortage of
20 units of the good?
a. a price ceiling set at $4
b. a price ceiling set at $5
c. a price floor set at $7
d. a price floor set at $8
A country has $100 million of net exports and $170 million of saving. Net capital
outflow is
a. $70 million and domestic investment is $170 million.
b. $70 million and domestic investment is $270 million.
c. $100 million and domestic investment is $70 million.
d. None of the above is correct.
People are likely to respond to a policy change
a. only if they think the policy is a good one.
b. only if the policy change changes the costs of their behavior.
c. only if the policy change changes the benefits of their behavior.
d. if the policy changes either the costs or benefits of their behavior.
Most studies indicate that tobacco and marijuana tend to be
a. substitutes.
b. complements.
c. unrelated because one good is legal while the other one is illegal.
d. inferior goods.
If the reserve requirement is 15 percent a bank desires to hold no excess reserves and it
receives a new deposit of $10, then this bank
a. must increase its required reserves by $10.
b. will initially see its total reserves increase by $15.
c. will be able to make new loans up to a maximum of $8.50.
d. All of the above are correct.
A worker received $5 for a daily wage in 1930. What is the value of that wage today if
the CPI was 17 in 1930 and is 215 today?
a. 40 cents
b. $5
c. $63.24
d. $632.40
Figure 17-1
Refer to Figure 17-1. When the money supply curve shifts from MS1 to MS2,
a. the equilibrium value of money decreases.
b. the equilibrium price level decreases.
c. the supply of money has decreased.
d. the demand for goods and services will decrease.
Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity
and P represents price.
Refer to Figure 9-16. The tariff
a. decreases producer surplus by the area C and decreases consumer surplus by the area
C + D + E + F.
b. decreases producer surplus by the area C + D and decreases consumer surplus by the
area D + E + F.
c. increases producer surplus by the area C and decreases consumer surplus by the area
C + D + E + F.
d. increases producer surplus by the area B + C and decrease consumer surplus by the
area D + E + F.
A decrease in the expected price level shifts
a. only the long-run aggregate supply curve right.
b. only the short-run aggregate supply curve right.
c. both the short-run and the long-run aggregate supply curve right.
d. Neither the short-run nor the long-run aggregate supply curve right.
Suppose France imposes a tariff on wine of 3 euros per bottle. If government revenue
from the tariff amounts to 30 million euros per year and if the quantity of wine supplied
by French wine producers, with the tariff, is 8 million bottles per year, then we can
conclude that
a. the quantity of wine demanded by France, with the tariff, is 18 million bottles per
year.
b. the quantity of wine demanded by France, without the tariff, would be 24 million
bottles per year.
c. the amount of the deadweight loss is 24 million euros per year.
d. the tariff causes French buyers of wine to pay 2 euros more per bottle than they
would pay without the tariff.
Figure 9-10. The figure applies to Mexico and the good is rifles.
Refer to Figure 9-10. When trade takes place, the quantity Q2 – Q1 is
a. the number of rifles bought and sold in Mexico.
b. the number of rifles produced in Mexico.
c. the number of rifles exported by Mexico.
d. the number of rifles imported by Mexico.
Scenario 8-2
Tom mows Stephanie’s lawn for $25. Tom’s opportunity cost of mowing Stephanie’s
lawn is $20, and Stephanie’s willingness to pay Tom to mow her lawn is $28.
Refer to Scenario 8-2. Assume Tom is required to pay a tax of $10 each time he mows
a lawn. Which of the following results is most likely?
a. Stephanie now will decide to mow her own lawn, and Tom will decide it is no longer
in his interest to mow Stephanie’s lawn.
b. Stephanie still is willing to pay Tom to mow her lawn, but Tom will decline her offer.
c. Tom still is willing to mow Stephanie’s lawn, but Stephanie will decide to mow her
own lawn.
d. Tom and Stephanie still can engage in a mutually-agreeable trade.
Which of the following is not correct?
a. Economists who argue that labor taxes are highly distorting believe that labor supply
is fairly elastic.
b. Economists who argue that labor taxes are not highly distorting believe that labor
supply is fairly inelastic.
c. Economists who argue that labor supply is fairly inelastic cite elderly workers who
adjust the date they retire as an example.
d. Economists who argue that labor supply is fairly elastic cite workers who adjust the
hours of overtime that they work as an example.
Economists speaking like scientists make
a. positive statements.
b. prescriptive statements.
c. claims about how the world should be.
d. More than one of the above is correct.
In 2009, Corny Company grows and sells $2 million worth of corn to Tasty Cereal
Company, which makes corn flakes. Tasty Cereal Company produces $6 million worth
of corn flakes in 2009, with sales to households during the year of $4.5 million. The
unsold $1.5 million worth of corn flakes remains in Tasty Cereal Company’s inventory
at the end of 2009. The transactions just described contribute how much to GDP for
2009?
a. $4.5 million
b. $6 million
c. $6.5 million
d. $8 million
Which of the following is correct in an open economy?
a. S = I
b. S = NX + NCO
c. S = NCO
d. S = I + NCO
The opening of a new American-owned factory in Algeria would tend to increase
Algeria’s GDP more than it increases Algeria’s GNP because
a. some of the income from the factory accrues to people who do not live in Algeria.
b. gross domestic product is income earned within a country by both residents and
nonresidents, whereas gross national product is the income earned by residents of a
country while producing both at home and abroad.
c. all of the income from the factory is included in Algeria’s GDP.
d. All of the above are correct.
As compared to spending generated by a tax cut, an increase in government
expenditures is likely to affect aggregate demand
a. more quickly and more likely to be spent on projects with little benefit.
b. more quickly but less likely to be spent on projects with little benefit.
c. less quickly but more likely to be spent on projects with little benefit.
d. less quickly and more likely to be spent on projects with little benefit.
Which of the following is an example of a normative – as opposed to a positive –
statement?
a. The discount rate is the interest rate the Federal Reserve charges banks to borrow
funds.
b. The US income tax rate increases with the amount of income earned.
c. The government should increase the tax on gasoline.
d. The US unemployment rate increased to 10 percent in 2009.
Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales
a. are an export of the U.S. and increase U.S. net exports.
b. are an export of the U.S. and decrease U.S. net exports.
c. are an import of the U.S. and increase U.S. net exports.
d. are an import of the U.S. and decrease U.S. net exports.
Factors of production are
a. the mathematical calculations firms make in determining their optimal production
levels.
b. social and political conditions that affect production.
c. the physical relationships between economic inputs and outputs.
d. inputs into the production process.
Which of the following would increase in response to a decrease in the price of ironing
boards?
a. the quantity of irons demanded at each possible price of irons
b. the equilibrium quantity of irons
c. the equilibrium price of irons
d. All of the above are correct.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. The loss of producer surplus associated with some sellers
dropping out of the market as a result of the tax is
a. $0.
b. $1.
c. $2.
d. $3.
In early 2008, the central bank of Zimbabwe announced the inflation rate in that
country had reached
a. 60 percent.
b. 80 percent.
c. 220 percent.
d. 24,000 percent.
In the open-economy macroeconomic model, a decrease in the domestic interest rate
shifts
a. demand in the market for foreign-currency exchange to the right.
b. demand in the market for foreign-currency exchange to the left.
c. supply in the market for foreign-currency exchange to the right.
d. supply in the market for foreign-currency exchange to the left.
A tax increase has
a. a multiplier effect but not a crowding out effect
b. a crowding out effect but not a multiplier effect
c. both a crowding out and multiplier effect
d. neither a multiplier or crowding out effect
The aggregate-demand curve
a. has a slope that is explained in the same way as the slope of the demand curve for a
particular product.
b. is vertical in the long run.
c. shows an inverse relation between the price level and the quantity of all goods and
services demanded.
d. All of the above are correct.
Liquidity preference refers directly to Keynes’ theory concerning
a. the effects of changes in money demand and supply on interest rates.
b. the effects of changes in money demand and supply on exchange rates.
c. the effects of wealth on expenditures.
d. the difference between temporary and permanent changes in income.