A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It
also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010,
a. real output and the price level both rose.
b. real output rose and the price level fell.
c. real output fell and the price level rose.
d. real output and the price level both fell.
If the supply of loanable funds shifts right, then
a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce
hunger cravings. Other things the same we would expect
a. the demand for existing shares of stock in this company to decrease, so the price
would fall.
b. the demand for existing shares of stock in this company to increase, so the price
would rise.
c. the supply of existing shares of stock in this company to decrease, so the price would
fall.
d. the supply of existing shares of stock in this company to increase, so the price would
rise.
Other things the same, an increase in the foreign price level leads to an increase in the
real exchange rate.
a. True
b. False
Which of the following lists is included in what economists call “money”?
a. cash
b. cash and stocks and bonds
c. cash and stocks and bonds and real estate
d. cash and stocks and bonds and real estate and all other assets
If a surplus exists in a market, then we know that the actual price is
a. above the equilibrium price, and quantity supplied is greater than quantity demanded.
b. above the equilibrium price, and quantity demanded is greater than quantity supplied.
c. below the equilibrium price, and quantity demanded is greater than quantity supplied.
d. below the equilibrium price, and quantity supplied is greater than quantity demanded.
Which of the following decreases if the U.S. removes an import quota on computer
components?
a. U.S. imports and U.S. exports.
b. U.S. imports but not U.S. exports.
c. U.S. exports but not U.S. imports.
d. Neither U.S. exports nor U.S. imports.
The “broken window fallacy”
a. explains why inflation is so high.
b. is a justification for the government to print more money.
c. is illustrated when a government program is justified not on its merits but on the
number of jobs it will create.
d. has nothing to do with public policy.
Figure 34-13
Refer to Figure 34-13. The economy is currently at point A. Given the current
situation, the Federal Reserve will _____ bonds, which causes interest rates to _____.
Suppose you like to make, from scratch, pies filled with banana cream and vanilla
pudding. You notice that the price of bananas has increased. As a result, your demand
for vanilla pudding would
a. decrease.
b. increase.
c. be unaffected.
d. There is insufficient information given to answer the question.
Which of the following shifts aggregate demand to the left?
a. an increase in the price level.
b. households decide to save a larger fraction of their income.
c. an increase in net exports.
d. Congress passes a new investment tax credit.
Figure 35-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output
and on the right-hand diagram, U represents the unemployment rate.
RefertoFigure35-3.Assume the figure charts possible outcomes for the year 2018. In
2018, the economy is at point B on the left-hand graph, which corresponds to point B
on the right-hand graph. Also, point A on the left-hand graph corresponds to A on the
right-hand graph. The price level in the year 2018 is
a. 155.56.
b. 159.00.
c. 163.50.
d. 170.04.
Table 3-35
RefertoTable3-35.Which good(s) does Finland have an absolute advantage producing?
a. both eggs and ham.
b. eggs but not ham.
c. ham but not eggs.
d. neither ham nor eggs.
The production possibilities frontier is used to illustrate some basic economic ideas,
including
a. scarcity.
b. opportunity cost.
c. economic growth.
d. All of the above are correct.
If the number of buyers in a market decreases, then
a. demand will increase.
b. demand will decrease.
c. supply will increase.
d. supply will decrease.
Other things the same, a higher real exchange rate raises net exports.
a. True
b. False
The production possibilities frontier shows the opportunity cost of one good as
measured in terms of the other good.
a. True
b. False
An adverse supply shock shifts the short-run Phillips curve to the left.
a. True
b. False
In the open-economy macroeconomic model, the supply curve of currency is vertical
because the quantity of currency supplied does not depend on the real exchange rate.
a. True
b. False
If the real exchange rate for the dollar is above the equilibrium level, the quantity of
dollars supplied in the market for foreign-currency exchange is
a. greater than the quantity demanded and the dollar will appreciate.
b. greater than the quantity demanded and the dollar will depreciate.
c. less than the quantity demanded and the dollar will appreciate.
d. less than the quantity demanded and the dollar will depreciate.
Consider five high school students working on homework in study hall.
Which of the following pairs of students has a double coincidence of wants?
a. Rosie and Piper
b. Piper and Molly
c. Dewey and Molly
d. Bob and Dewey
The theory of purchasing-power parity implies that the demand curve for
foreign-currency exchange is
a. downward sloping.
b. upward sloping.
c. horizontal.
d. vertical.
As opposed to a payments system based on barter, a payments system based on money
a. requires a double coincidence of wants.
b. leads to less specialization.
c. makes trades less costly.
d. None of the above is correct.
Samuelson and Solow argued that when unemployment is high, there is
a. upward pressure on wages and prices.
b. upward pressure on wages and downward pressure on prices.
c. upward pressure on prices and downward pressure on wages.
d. downward pressure on wages and prices.
A technological advance in the production of the first good increases the opportunity
cost of the first good in terms of the second good.
a. True
b. False
Which of the following statements is correct?
a. Economists almost always find it easy to conduct experiments in order to test their
theories.
b. Economics is not a true science because economists are not usually allowed to
conduct experiments to test their theories.
c. Economics is a social science rather than a true science because it cannot employ the
scientific method.
d. Economists are usually not able to conduct experiments, so they must rely on natural
experiments offered by history.
Points outside the production possibilities frontier represent infeasible levels of
production.
a. True
b. False
Which of the following changes in the price index produces the greatest rate of
inflation: 80 to 100, 100 to 120, or 150 to 170?
a. 80 to 100
b. 100 to 120
c. 150 to 170
d. All of these changes produce the same rate of inflation.
Suppose the typical consumer buys more bananas than oranges. In fixing the basket of
goods and services for the purpose of calculating the consumer price index, the Bureau
of Labor Statistics
a. ignores the fact that the typical consumer buys more bananas than orange; this
procedure does not affect the value of the index.
b. ignores the fact that the typical consumer buys more bananas than orange; this
procedure results in a potentially-serious bias in the index.
c. places more weight on the price of bananas than on the price of oranges; the weights
of the two prices are determined by surveying consumers.
d. places more weight on the price of bananas than on the price of oranges; the weights
of the two prices are determined by the extent to which those prices have changed over
the previous year.
You are planning a graduation trip to Mexico. Other things the same, if the dollar
depreciates relative to the peso, then
a. the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars.
b. the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars.
c. the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.
d. the dollar buys more pesos. Your hotel room in Mexico will require more dollars.
Dollar prices and relative prices are both nominal variables.
a. True
b. False
If the price of a dress is three times the price of a pair of shoes, then a pair of shoes
contributes
a. exactly one-third as much to GDP as does a dress.
b. more than one-third as much to GDP as does a dress.
c. less than one-third as much to GDP as does a dress.
d. exactly one-fourth as much to GDP as does a dress.
Give an example of government intervention that is intended to reduce an externality.
Suppose a nation experiences increased immigration from abroad. Which curves in the
aggregate demand and aggregate supply model would be affected, and which way
would they shift?
A farmer sells sugar to a candy producer for $150. If the producer uses this sugar to
make candy that sells for $200, what is the total contribution to GDP from these
transactions?
The catch-up effect says that countries with low income can grow faster than countries
with higher income.
However, in statistical studies that include many diverse countries we do not observe
the catch-up-effect unless we control for other variables that affect productivity.
Considering the determinants of productivity, list and explain some things that would
tend to prohibit or limit a poor country’s ability to catch up with the rich ones.
If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real
interest rate?
Changes in what four variables will shift the long run aggregate supply curve?
Critics of stabilization policy argue that monetary and fiscal policies affect the economy
with .
In order to assess the level of prosperity in a nation in a given year, should we examine
the level of that nation’s real GDP per person, or should we examine the growth rate of
that nation’s real GDP per person?
Suppose speculators lost confidence in foreign economies and bought more U.S. bonds.
How would this affect net exports in the U.S., and which way would this cause the
aggregate demand curve to shift?
Following the recession of 2001, there was a month in which employment and the
unemployment rate both rose. Assuming the computations were correct, how is it
possible for both to have increased?
Some countries have had relatively high inflation and relatively high unemployment for
long periods of time. Is this consistent with the Phillips curve? Defend your answer.
Figure 2-3
Refer to Figure2-3. What are two elements not included in this figure that could be
included in a more complex model?
Until recently, shares of stock accounted for 40 percent of Jimmy’s savings. A few days
ago, Jimmy sold some bonds and bought some additional shares of stock. Now shares
of stock account for 70 percent of Jimmy’s savings. How did this change affect Jimmy’s
expected retun on his savings? How did it affect the risks he faces?
What does the text mean by the question, “Where Is All the Currency?” How does it
answer the question?
In the circular flow diagram, when Daphne purchases a new mobile phone, she
participates in the markets for
Using typical estimates of the sacrifice ratio, how much output would likely be
sacrificed to reduce inflation from 4 percent to 2 percent?
Figure 34-10
RefertoFigure34-10.Suppose the multiplier is 2 and there is no crowding-out, but there
is an accelerator effect. If the economy is currently at point A, then an increase in
government purchases of $10 will likely increase aggregate demand to point where
output is $.