In the monetarist version of the AD-AS framework, an increase in the money supply
produces a __________ shift of the __________ curve.
a. rightward; AD
b. rightward; SRAS
c. leftward; AD
d. leftward; SRAS
According to real business cycle theorists, if the long-run aggregate supply (LRAS)
curve shifts to the left, Real GDP __________, the price level __________, the demand
for labor __________, money wages __________, real wages __________, and
workers choose to work __________.
a. falls; falls; rises; fall; fall; less
b. falls; rises; rises; fall; rise; more
c. falls; rises; falls; fall; fall; less
d. rises; rises; falls; fall; rise; more
e. rises; falls; rises; fall; fall; more
If the bid value of a Treasury bond is listed as “112:16”, it means that the buyer is
willing to pay $1,125 for the bond.
a. True
b. False
Which of the following is a possible rationing device?
a. dollar price
b. first-come-first-served
c. brute force
d. a and b
e. a, b, and c
When income taxes fall, the supply of labor curve shifts rightward, ultimately leading to
the LRAS curve shifting rightward (economic growth).
a. True
b. False
The economy is currently operating at a point on its physical production possibilities
frontier (physical PPF). It is
a. producing Natural Real GDP and operating below the natural unemployment rate.
b. producing more than Natural Real GDP and operating above the natural
unemployment rate.
c. producing more than Natural Real GDP and operating below the natural
unemployment rate.
d. in long-run equilibrium.
If the demand for foodstuffs is inelastic, which of the following positions would be
most beneficial to Farmer Jones?
a. Bad weather for Jones and good weather for all other farmers.
b. Bad weather for all farmers except Jones (who witnesses good weather).
c. Bad weather for all farmers.
d. Good weather for all farmers.
e. There is not enough information to answer the question.
When the Fed was created, its governing body was called the Federal Reserve Board,
but it was later officially renamed the Board of Governors of the Federal Reserve
System.
a. True
b. False
The aggregate supply curve is depicted as vertical in the simple quantity theory of
money.
a. True
b. False
With a quota, the __________ is greater than the __________.
a. loss in producers’ surplus; gain in consumers’ surplus
b. loss in consumers’ surplus; loss in producers’ surplus plus higher total revenues on
the imported goods
c. loss in producers’ surplus plus higher total revenues on the imported goods;
consumers’ surplus
d. tax; revenue
e. quota-determined price; quota-determined output
A theory is an abstract representation of reality. This means a theory
a. is descriptive of the way the world is.
b. is an unrealistic representation of reality.
c. omits certain factors when trying to explain something.
d. is usually expressed in professional jargon.
e. none of the above
According to public choice theory, low voter turnouts are the result of voters
a. being apathetic.
b. being uninformed.
c. being lazy.
d. disliking the candidates.
e. calculating their costs and benefits of voting.
When a person buys a bond of the XYZ Corporation, he or she can expect to
a. pay the corporation a certain amount of money each quarter of the year.
b. receive the face value of the bond each year and the face value of the bond when the
bond matures.
c. receive the coupon rate times the face value of the bond each year and the face value
of the bond when the bond matures.
d. receive the face value of the bond each year in perpetuity.
A decrease in unemployment causes the PPF to shift outward (to the right).
a. True
b. False
If the dollar depreciates, the U.S. AD curve shifts _______________, the U.S. SRAS
curve shifts __________________, and the price level will
_________________________.
a. rightward; leftward; increase
b. rightward; leftward; decrease
c. leftward; rightward; increase
d. leftward; rightward; decrease
The price of a foodstuff falls and the total revenue (received by farmers for selling the
foodstuff) rises. What could explain this?
a. Increased supply and elastic demand.
b. Real income rises and the foodstuff is an inferior good.
c. Real income rises and the foodstuff is a normal good.
d. Increased supply and inelastic demand.
e. none of the above
A special interest group has a good chance of redistributing (transferring) income from
others to itself if the
a. costs of the transfer are spread over a very large number of people.
b. costs of the transfer are spread over a very small number of people.
c. costs of the transfer are spread over the same number of people that comprise the
special interest group.
d. the number of members in the special interest group is greater than 100.
e. none of the above
Exhibit 15-4
Assume that people have only two choices when it comes to holding their wealth: in
money or in bonds.
In the row of this table containing blank (B), people are holding ______________ of
their wealth in bonds and ________________ of their wealth in money.
a. too much; too little
b. too little; too much
c. just the right amount; too little
d. just the right amount; too much
e. just the right amount; just the right amount
Situation 32-1
In the early 1980s, the U.S. automobile industry managed to influence the government
to negotiate a voluntary export restraint agreement with Japan that was in effect from
1981 until 1985. The predictable result was an average increase in the price of Japanese
cars by about $1,000 and of U.S. cars by about $370. Also, as a result of the import
quotas, 26,000 new jobs were “created” in the U.S. automobile industry.
Which of the following arguments is least likely to have been used by the U.S. auto
industry to argue for import quotas?
a. If the quantity of low-priced import cars is not restricted, foreigners will overtake the
U.S. car market.
b. A healthy auto industry is vital to our national security.
c. If import quotas are in place, our profits will increase by about $300 per vehicle.
d. Japan is protecting its market, and so should we; all we want is a level playing field.