Economists regard events from the past as
a. irrelevant, since history is unlikely to repeat itself.
b. of limited interest, since those events seldom provide any useful economic data.
c. interesting but not particularly valuable, since those events cannot be used to evaluate
present-day economic theories.
d. interesting and valuable, since those events are capable of helping us to understand
the past, the present, and the future.
If a bank uses $500 of excess reserves to make a new loan when the reserve ratio is 8
percent, this action by itself initially makes the money supply
a. and wealth increase by $500.
b. and wealth decrease by $500.
c. increase by $500 while wealth does not change.
d. decrease by $500 while wealth decreases by $500.
Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer’s
basket consists of 20 pounds of meat and 10 toys.
RefertoTable24-5.The cost of the basket
a. decreased by $2 from 2004 to 2005.
b. increased by $3 from 2004 to 2005.
c. increased by $7 from 2004 to 2005.
d. increased by $10 from 2004 to 2005.
If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and
its imports fell by $10 billion, its net exports would now be
a. $37 billion
b. $3 billion
c. -$3 billion
d. -$37 billion
Which of the following is a determinant of productivity?
a. human capital per worker
b. physical capital per worker
c. natural resources per worker
d. All of the above are correct.
Table29-6.
RefetoTable29-6. The Bank of Pleasantville’s reserve ratio is
a. 6.4 percent.
b. 16.7 percent.
c. 6.0 percent.
d. 15.7 percent.
If the unemployment rate is below the natural rate, then
a. inflation is less than expected. As inflation expectations are revised the short-run
Phillips curve will shift right.
b. inflation is less than expected. As inflation expectations are revised the short-run
Phillips curve will shift left.
c. inflation is greater than expected. As inflation expectations are revised the short-run
Phillips curve will shift left.
d. inflation is greater than expected. As inflation expectations are revised the short-run
Phillips curve will shift right.
Table3-34
Assume that Indonesia and India can switch between producing rice and bananas at a
constant rate.
Referto Table 3-34.At which of the following prices, if any, can India and Indonesia
both gain from trade?
a. 1/5 units of bananas per unit of rice.
b. 1/3 units of bananas per unit of rice.
c. 3/5 units of bananas per unit of rice.
d. None of the above.
In the openeconomy macroeconomic model, if a country’s interest rate rises, then its
a. net capital outflow and net exports rise.
b. net capital outflow rises and its net exports fall.
c. net capital outflow falls and its net exports rise.
d. net capital outflow and net exports fall.
GDP includes the value of paper clips but does not also count the value of the metal
used to make them.
a. True
b. False
If a higher price means a greater quantity supplied, then the supply curve slopes
upward.
a. True
b. False
Japan’s status as a rich nation is attributable to
a. Japan’s quantities of natural resources, but not to international trade.
b. international trade, but not to Japan’s domestic quantities of natural resources.
c. the fact that Japanese productivity has remained nearly constant for more than 100
years.
d. the fact that the Japanese have downplayed the role of human capital in economic
growth.
If a country’s budget deficit increases, then in the market for foreigncurrency exchange,
a. the supply of its currency shifts right, so the exchange rate falls.
b. the demand for its currency shifts right, so the exchange rate rises.
c. the supply of its currency shifts left, so the exchange rate rises.
d. the demand for its currency shifts left.so the exchange rate falls.
Slow growth in US incomes during the 1970s and 1980s was primarily due to
a. slow productivity growth in the US.
b. increased competition from Japan.
c. increased competition from European countries.
d. a rapid decrease in the quantity of money in the economy.
Other things the same, which of the following would increase productivity?
a. an increase in either human or physical capital
b. an increase in human capital but not an increase in physical capital
c. an increase in physical capital but not an increase in human capital
d. neither an increase in human capital nor an increase in physical capital
The GDP deflator can be used to take inflation out of nominal GDP.
a. True
b. False
During a recession unemployment benefits rise. This rise in benefits makes aggregate
demand higher than otherwise.
a. True
b. False
An increase in the budget deficit
a. reduces net capital outflow and domestic investment.
b. reduces net capital outflow and raises domestic investment.
c. raises net capital outflow and domestic investment
d. raises net capital outflow and reduces domestic investment.
In a closed economy, if Y is 10,000, T is 1,000, G is 3,000, and C is 5,000, then
a. the government has a budget surplus and investment is 1,000
b. the government has a budget surplus and investment is 2,000
c. the government has a budget deficit and investment is 1,000
d. the government has a budget deficit and investment is 2,000
Sectoral changes in demand
a. create frictional unemployment, while firms paying wages above equilibrium to
attract a better pool of candidates creates structural unemployment.
b. create structural unemployment, while firms paying wages above equilibrium to
attract a better pool of candidates creates frictional unemployment.
c. and firms paying wages above equilibrium to attract a better pool of candidates both
create structural unemployment.
d. and firms paying wages above equilibrium to attract a better pool of candidates both
create frictional unemployment.
Fiscal policy affects the economy
a. only in the short run.
b. only in the long run.
c. in both the short and long run.
d. in neither the short nor the long run.
Which of the following is correct?
a. Well designed tax cuts can increase investment which fluctuates more than
consumption over the business cycle.
b. Well designed tax cuts can increase investment but it fluctuates less than
consumption over the business cycle.
c. Tax cuts have little effect on investment which fluctuate more than consumption over
the business cycle.
d. Tax cuts have little effect on investment but it fluctuates less than consumption over
the business cycle
Which of the following items is notincluded in the most narrow definition of money,
M1?
a. currency
b. savings deposits
c. traveler’s checks
d. demand deposits
When the dollar appreciates, U.S.
a. exports decrease, while imports increase.
b. exports and imports decrease.
c. exports and imports increase.
d. exports increase, while imports decrease.
Policymakers who influence aggregate demand can potentially mitigate the severity of
economic fluctuations.
a. True
b. False
All financial intermediaries are financial institutions, but not all financial institutions
are financial intermediaries.
a. True
b. False
Figure 4-19
RefertoFigure4-19. If there is currently a shortage of 20 units of the good, then the law
of
a. demand predicts that the price will rise by $2 to eliminate the shortage.
b. supply predicts that the price will rise by $2 to eliminate the shortage.
c. supply and demand predicts that the price will rise by $2 to eliminate the shortage.
d. supply and demand predicts that the price will fall by $2 to eliminate the shortage.
The future value of $500 saved for two years at an interest rate of 5% is
a. $550.25.
b. $550.00.
c. $551.25.
d. None of the above are correct.
The market demand curve
a. is found by vertically adding the individual demand curves.
b. slopes upward.
c. represents the sum of the prices that all the buyers are willing to pay for a given
quantity of the good.
d. represents the sum of the quantities demanded by all the buyers at each price of the
good.
The government’s purchases of goods but not its purchases of services are included in
GDP.
a. True
b. False
Table 3-29
Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
RefertoTable3-29.Juanita’s opportunity cost of programming one cellular phone is
testing
a. 7.5 cellular phones and Shantala’s opportunity cost of programming one cellular
phone is testing 5/2 cellular phones.
b. 2/15 cellular phones and Shantala’s opportunity cost of programming one cellular
phone is testing 5/2 cellular phones.
c. 7.5 cellular phones and Shantala’s opportunity cost of programming one cellular
phone is testing 2/5 cellular phones.
d. 2/15 cellular phones and Shantala’s opportunity cost of programming one cellular
phone is testing 2/5 cellular phones.
According to purchasing-power parity, if the same basket of goods costs $100 in the
U.S. and 50 pounds in Britain, then what is the nominal exchange rate?
a. 2 pounds per dollar
b. 1 pound per dollar
c. 1/2 pound per dollar
d. None of the above is correct
Other things the same, a country could move from having a trade surplus to having a
trade deficit if either
a. saving rose or domestic investment rose.
b. saving rose or domestic investment fell.
c. saving fell or domestic investment rose.
d. saving fell or domestic investment fell.
Figure 3-19
Refer to Figure3-19. Colombia would incur an opportunity cost of 24 pounds of coffee
if it increased its production of soybeans by
a. 12 pounds.
b. 18 pounds.
c. 36 pounds.
d. 48 pounds.
Today’s supply curve for iPods could shift in response to a change in
a. today’s price of iPods.
b. the expected future price of iPods.
c. the number of buyers of iPods.
d. All of the above are correct.