In the late summer of 2005 some regions of the country were suffering from drought.
What effect would we expect this to have on the stock of companies such as John Deere
that manufacture farm equipment?
a. raise the demand for existing shares of the stock, causing the price to rise
b. decrease the demand for existing shares of the stock, causing the price to fall
c. raise the supply of the existing shares of stock, causing the price to rise
d. raise the supply of the existing shares of stock, causing the price to fall
Abby bakes brownies and Liam grows flowers. In which of the following cases is it
impossible for both Abby and Liam to benefit from trade?
a. Abby does not like flowers and Liam does not like brownies.
b. Abby is better than Liam at baking brownies and Liam is better than Abby at growing
flowers.
c. Liam is better than Abby at baking brownies and at growing flowers.
d. Both Abby and Liam can benefit from trade in all of the above cases.
In 2012, the imaginary nation of Platland had a population of 10,000 and real GDP of
42,000,000. During the year its real GDP per person grew by about 1.94%. Which of
the following sets of growth rates is consistent with this growth in real GDP per person?
a. 3% population growth and 4% real GDP growth
b. 3% population growth and 5% real GDP growth
c. 6% population growth and 4% real GDP growth
d. 6% population growth and 5% real GDP growth
The Fed lowered interest rates in 2007 and 2008. This implies, other things the same,
that the Fed
a. increased the money supply because it was concerned about unemployment.
b. increased the money supply because it was concerned about inflation.
c. decreased the money supply because it was concerned about unemployment.
d. decreased the money supply because it was concerned about inflation.
Figure 2-5
Refer to Figure2-5. If this economy devotes all of its resources to the production of
dryers, then it will produce
a. 0 dryers and 100 washers.
b. 60 dryers and 50 washers.
c. 80 dryers and 0 washers.
d. 80 dryers and 50 washers.
Recession come at
a. regular intervals. During recessions consumption spending falls relatively more than
investment spending.
b. regular intervals. During recessions investment spending falls relatively more than
consumption spending.
c. irregular intervals. During recessions consumption spending falls relatively more
than investment spending.
d. irregular intervals. During recessions investment spending falls relatively more than
consumption spending.
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.
In which of the following cases would the quantity of money demanded be smallest?
a. = 0.06, P= 1.2
b. = 0.05, P = 1.0
c. = 0.04, P = 1.2
d. = 0.06, P = 1.0
Over the period 1960-1990,
a. South Korea had a higher growth rate than the United States because it had a higher
ratio of investment to GDP.
b. the United States had a higher growth rate than South Korea because it had a higher
ratio of investment to GDP.
c. South Korea had a higher growth rate than the United States even though it had a
similar ratio of investment to GDP.
d. the United States had a higher growth rate than South Korea even though it had a
similar ratio of investment to real GDP.
Marion collected Social Security payments of $250 a month in 1985. If the price index
rose from 90 to 108 between 1985 and 1986, then her Social Security payments for
1986 should have been
a. $268.
b. $292.
c. $300.
d. $358.
Figure 33-6.
RefertoFigure33-6. Which of the long-run aggregate-supply curves is consistent with a
short-run economic expansion?
a. LRAS1
b. LRAS2
c. LRAS3
d. Both LRAS1and LRAS3
When the money market is drawn with the value of money on the vertical axis, an
increase in the money supply shifts the money supply curve to the
a. right, lowering the price level.
b. right, raising the price level.
c. left, raising the price level.
d. left, lowering the price level.
For a country such as the U.S., the wealth effect exerts a very important influence on
the slope of the aggregate- demand curve, since U.S. wealth is large relative to wealth
in most other countries.
a. True
b. False
A decrease in the price of a product and an increase in the number of buyers in the
market affect the demand curve in the same general way.
a. True
b. False
Which of the following reduces the potential burden of an increase in debt on future
generations?
a. the growth rate of output is high
b. in response to increased debt, parents save more to leave their children larger
bequests
c. some current government spending benefits future taxpayers
d. All of the above are correct.
Figure 3-19
Refer to Figure3-19. Chile and Colombia would notbe able to gain from trade if
Colombia’s opportunity cost of one pound of soybeans changed to
a. 1/2 pound of coffee.
b. 3/4 pound of coffee.
c. 4/3 pounds of coffee.
d. 2 pounds of coffee.
Which of the following are human capital and physical capital, respectively?
a. for a brick layer: her bricks and her tools
b. for a gas station: the pumps and the cash register
c. for a restaurant: the chefs’ knowledge about preparing food and the equipment in the
kitchen
d. for a medical office: the building and the doctors’ knowledge of medicine
The utility function of a risk-averse person has a
a. positive slope and gets steeper as wealth increases.
b. positive slope but gets flatter as wealth increases.
c. negative slope but gets steeper as wealth increases.
d. negative slope and gets flatter as wealth increases.
Greg’s Tasty Ice Cream is considering building a new ice cream factory that costs $8.3
million. The company accountants believe that, not accounting for interest costs,
building the factory will increase profits by $5 million the first year, $4 million the
second year and have no value thereafter. Greg’s Tasty Ice Cream should build the
factory if the interest rate is
a. 3% but not if it is 4%.
b. 4% but not if it is 5%.
c. 5% but not if it is 6%.
d. 6% but not if it is 7%.
Suppose that some people report themselves as unemployed when, in fact, they are
working in the underground economy. If these persons were counted as employed, then
a. both the unemployment rate and labor-force participation rate would be higher.
b. both the unemployment rate and labor-force participation rate would be lower.
c. the unemployment rate would be higher, and the labor-force participation rate would
be higher.
d. the unemployment rate would be lower, and the labor-force participation rate would
be unaffected.
Which of the following statements is nottrue?
a. The U.S. has sometimes run budget deficits during times when it was not fighting
war and the economy was expanding.
b. The U.S. federal debt in 2012 was about $11.3 trillion.
c. Government debt per person represents more than 5 percent of a typical worker’s
lifetime resources.
d. Forward-looking parents can reverse adverse effects of government debt on their
children.
Sellers respond to a shortage by cutting their prices.
a. True
b. False
The federal funds rate is the interest rate that
a. banks charge one another for loans.
b. banks charge the Fed for loans.
c. the Fed charges banks for loans.
d. the Fed charges Congress for loans.
The percentage change in the price level from one period to another is called
a. the growth rate.
b. the inflation rate.
c. the GDP deflator.
d. the unemployment rate.
Table 28-4
2010 Labor Data for Adults (ages 16 and older) in Meditor
RefetoTable28-4. What is the adult labor-force participation rate in Meditor?
a. 37.5%
b. 62.5%
c. 66.7%
d. 95.8%
Which of the following items is included in M2?
a. credit cards
b. money market mutual funds
c. corporate bonds
d. large time deposits
Scenario 29-2.
The Monetary Policy of Tazi is controlled by the country’s central bank known as the
Bank of Tazi. The local unit of currency is the taz. Aggregate banking statistics show
that collectively the banks of Tazi hold 300 million tazes of required reserves, 75
million tazes of excess reserves, have issued 7,500 million tazes of deposits, and hold
225 million tazes of Tazian Treasury bonds. Tazians prefer to use only demand deposits
and so all money is on deposit at the bank.
RefetoScenario29-2.Suppose that the Bank of Tazi changes the reserve requirement to
3 percent. Assuming that the banks still want to hold the same percentage of excess
reserves what is the value of the money supply after the change in the reserve
requirement?
a. 9,375 million tazes
b. 10,000 million tazes
c. 12,500 million tazes
d. None of the above is correct to the nearest million tazes.
Figure 4-7
RefertoFigure4-7. The movement from Da to Db in the market for potato chips could
be caused by a(n)
a. decrease in the price of potato chips.
b. decrease in income, assuming that potato chips are a normal good.
c. announcement by the FDA that potato chips cause cancer.
d. increase in the price of a pretzels.
Approximately what percentage of the world’s economies experience scarcity?
a. 10%
b. 40%
c. 85%
d. 100%
When we express Babe Ruth’s 1931 salary in today’s dollars and compare his salary to
those of current New York Yankee players, we find that the current median salary of
today’s Yankees is
a. about three quarters of Ruth’s salary.
b. about the same as Ruth’s salary.
c. about twice Ruth’s salary.
d. more than four times Ruth’s salary.
If the supply of loanable funds shifts to the right, then the equilibrium interest rate
a. and quantity of loanable funds rises.
b. and quantity of loanable funds falls.
c. rises and the quantity of loanable funds falls.
d. falls and the quantity of loanable funds rises.
If government policy encouraged households to save more at each interest rate, then
a. the real exchange rate and net exports would rise.
b. the real exchange rate and net exports would fall.
c. the real exchange rate would rise and net exports would fall.
d. the real exchange rate would fall and net exports would rise.
Fine Edge manufactures lawn mowers. In 2014 it had $2 million worth of lawn mowers
in inventory. In 2015 it sold $10 million worth of lawn mowers to consumers and had
$1 million worth of lawn mowers in inventory. How much did the lawn mowers
produced by Fine Edge add to GDP in 2015?
a. $11 million
b. $10 million
c. $7 million
d. $9 million
The substitution bias in the consumer price index refers to the
a. substitution by consumers toward new goods and away from old goods.
b. substitution by consumers toward a smaller number of high-quality goods and away
from a larger number of low-quality goods.
c. substitution by consumers toward goods that have become relatively less expensive
and away from goods that have become relatively more expensive.
d. substitution of new prices for old prices in the CPI basket of goods and services from
one year to the next.
Positive statements can be evaluated using data alone, but normative statements cannot.
a. True
b. False