At any meeting of the Federal Open Market Committee, that committee’s voting
members consist of
a. 5 Federal Reserve Regional Bank Presidents and all the members of the Board of
Governors.
b. 5 Federal Reserve Regional Bank Presidents and 5 members of the Board of
Governors.
c. 12 Federal Reserve Regional Bank Presidents and all the members of the Board of
Governors.
d. 12 Federal Reserve Regional Bank Presidents and 5 members of the Board of
Governors.
When opening a print shop you need to buy printers, computers, furniture, and similar
items. Economists call these expenditures
a. capital investment.
b. investment in human capital.
c. business consumption expenditures.
d. personal saving.
Suppose there is a decrease in aggregate demand. If the Fed wants to stabilize output it
could
a. buy bonds. These purchases also move the price level closer to its original level.
b. buy bonds. However these purchases move the price level farther from its original
level.
c. sell bonds. These sales also move the price level closer to its original level.
d. sell bonds. However these sales move the price level farther from its original level.
Which of the following is a financial intermediary?
a. a mutual fund
b. the stock market
c. a U.S. government bond
d. a wealthy individual who regularly buys and holds large quantities of government
bonds
A stockindexis
a. an average of a group of stock prices.
b. an average of a group of stock yields.
c. a measure of the risk relative to the profitability of corporations.
d. a report in a newspaper or other media outlet on the price of the stock and earnings of
the corporation that issued the stock.
For a given real interest rate, a decrease in the inflation rate would
a. decrease the after-tax real interest rate and so decrease saving.
b. decrease the after-tax real interest rate and so increase saving.
c. increase the after-tax real interest rate and so decrease saving.
d. increase the after-tax real interest rate and so increase saving.
Figure 33-8.
RefertoFigure33-8. Suppose the economy starts at Z. If changes occur that move the
economy to a new short run equilibrium of P3and Y3, then it must be the case that
a. short run aggregate supply has decreased.
b. short run aggregate supply has increased.
c. aggregate demand has increased.
d. aggregate demand has decreased.
If the wage is kept above the equilibrium level for any reason, the result is
unemployment.
a. True
b. False
If a U.S. citizen buys a television made in Korea by a Korean firm, then
a. U.S. net exports decrease and U.S. GDP decreases.
b. U.S. net exports are unaffected and U.S. GDP decreases.
c. U.S. net exports are unaffected and U.S. GDP is unaffected.
d. U.S. net exports decrease and U.S. GDP is unaffected.
If there is surplus of loanable funds, then
a. the supply for loanable funds shifts right and the demand shifts left.
b. the supply for loanable funds shifts left and the demand shifts right.
c. neither curve shifts, but the quantity of loanable funds supplied increases and the
quantity demanded decreases as the interest rate rises to equilibrium.
d. neither curve shifts, but the quantity of loanable funds supplied decreases and the
quantity demanded increases as the interest rate falls to equilibrium.
“Minimum wage laws result in unemployment” is a normative statement, while “the
minimum wage should be higher” is a positive statement.
a. True
b. False
Eric, a resident of Sweden, purchases a book printed in the U.S. Which country’s
exports increase?
a. Sweden’s
b. the U.S.’s
c. Sweden’s and the U.S.’s
d. neither Sweden’s nor the U.S.’s
Economists face an obstacle that many other scientists do not face. What is that
obstacle?
a. It is often difficult to formulate theories in economics.
b. It is often impractical to perform experiments in economics.
c. Economics cannot be addressed objectively; it must be addressed subjectively.
d. The scientific method cannot be applied to the study of economics.
When monetary and fiscal policymakers expand aggregate demand, which of the
following costs is incurred in the short run?
a. Short-run aggregate supply decreases.
b. The natural rate of unemployment increases.
c. The price level increases more rapidly.
d. The money supply increases less rapidly.
Suppose the multiplier has a value that exceeds 1, and there are no crowding out or
investment accelerator effects. Which of the following would shift aggregate demand to
the right by more than the increase in expenditures?
a. an increase in government expenditures
b. an increase in net exports
c. an increase in investment spending
d. All of the above are correct.
If financial turmoil overseas reduces U.S. net exports, then those in favor of “lean
against the wind policies” would advocate
a. decreasing the money supply and cutting taxes.
b. decreasing the money supply and raising taxes.
c. increasing the money supply and cutting taxes.
d. increasing the money supply and raising taxes.
RefertoFigure2-9,Panel(a).The opportunity cost of one cup of coffee is highest when
the economy produces
a. 0 cups of coffee.
b. 2 cups of coffee.
c. 4 cups of coffee.
d. 6 cups of coffee.
A U.S. mutual fund uses $1 million to buy yen from a Japanese bank. It then uses these
yen to buy stocks in a Japanese electronics firm. The Japanese electronic firm then
exchanges the $1 million dollars of yen for dollars from a U.S. bank. It uses these
dollars to buy equipment manufactured by a company located in the U.S. As a result of
these exchanges, by how much, if at all, and in which direction does:
A. U.S. net exports change?
B. U.S. net capital outflow change?
Disinflation is defined as a
a. zero rate of inflation.
b. constant rate of inflation.
c. reduction in the rate of inflation.
d. negative rate of inflation.
The equation, Unemployment rate = Natural rate of unemployment – a (Αctual inflation
– Expected inflation),
a. is the equation of the short-run Phillips curve.
b. implies there can be no stable short-run Phillips curve.
c. reflects the reasoning of Friedman and Phelps.
d. All of the above are correct.
Most economists use the aggregate demand and aggregate supply model primarily to
analyze
a. short-run fluctuations in the economy.
b. the effects of macroeconomic policy on the prices of individual goods.
c. the long-run effects of international trade policies.
d. productivity and economic growth.
Janet bought flour and used it to bake bread she ate. ABC Bakery bought flour which it
used to bake bread that customers purchased. In which case will the flour be counted as
a final good?
a. Janet’s purchase and ABC Bakery’s purchase.
b. ABC Bakery’s purchase but not Janet’s purchase.
c. Janet’s purchase but not ABC Bakery’s purchase.
d. Neither Janet’s purchase nor ABC Bakery’s purchase.
If real GDP doubles and the GDP deflator doubles, then nominal GDP
a. remains constant.
b. doubles.
c. triples.
d. quadruples.
If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to
a. $7,000 of new money.
b. $8,000 of new money.
c. $11,500 of new money.
d. $12,500 of new money.
Table 29-4.
RefetoTable29-4. If $800 is deposited into the First Bank of Fairfield, and the bank
takes no other actions, its
a. reserves will increase by $100.
b. liabilities will increase by $800.
c. assets will decrease by $800.
d. loans will increase by $800.
In the circular-flow diagram, one loop represents the flow of goods and services, and
the other loop represents the flow of factors of production.
a. True
b. False
Over time, continued budget deficits lead to
a. a higher capital stock and higher productivity.
b. a higher capital stock and lower productivity.
c. a lower capital stock and higher productivity.
d. a lower capital stock and lower productivity.
The main criticism of those who doubt the ability of the government to respond in a
useful way to the business cycle is that the theory by which money and government
expenditures change output is flawed.
a. True
b. False
Economists hold many positions advising the president and Congress including
a. being a member of the Council of Economic Advisers.
b. helping to enforce antitrust laws at the Department of Justice.
c. conducting research at the Congressional Budget Office.
d. All of these are possible positions that economists hold.
Suppose an apartment complex converts to a condominium, so that the former renters
are now owners of their housing units. Suppose further that a current estimate of the
value of the condominium owners’ housing services is the same as the rent they
previously paid. What happens to GDP as a result of this conversion?
a. GDP necessarily increases.
b. GDP necessarily decreases.
c. GDP is unaffected because neither the rent nor the estimate of the value
owner-occupied housing services is included in GDP.
d. GDP is unaffected because previously the rent payments were included in GDP and
now the rent payments are replaced in GDP by the estimate of the value of owner
occupied housing services.