Suppose you start your own company making T-shirts that commemorate campus
sporting events. An example of the resource capital would be
a. the factory you created in a building you are leasing
b. your time and effort used to produce T-shirts
c. the entire campus, since the demand for T-shirts is obtained from campus students
d. the athletic facilities, since the athletic teams generate sporting events advertised on
the T-shirts
e. your creative designs used to commemorate different sporting events
The Fed’s objectives have remained the same since its inception.
Which of the following is a normative macroeconomic statement?
a. An increase in government spending will reduce unemployment.
b. An active government policy should be employed to maintain a healthy economy.
c. The unemployment rate is 10 percent.
d. There is a positive relationship between inflation and the rate of growth of money
e. Gross domestic product grew 3 percent this year.
Aggregate expenditure is the sum of
a. all types of spending by households and firms
b. spending and savings by households
c. spending by households and governments on final goods and services
d. spending by households, government, firms, and foreigners on final goods and
services
e. all spending and saving by households, firms, and governments
If a lender wants a real return of 6 percent and she expects inflation to be 4 percent,
which of the following is the correct nominal interest rate to charge?
a. 4 percent
b. 6 percent
c. 2 percent
d. 10 percent
e. -2 percent
What is the range of the required reserve ratio?
a. Between 0 and 2
b. Between 0 and 1
c. Between 0 and 100
d. Between 0 and infinity
e. Between 0 and 10
The money supply curve is
a. upward sloping
b. downward sloping
c. vertical
d. horizontal
e. parallel to the money demand curve
Assume the most typical shapes for the demand and supply in a competitive market.
Suppose that demand falls and supply increases. Which of the following statements is
correct? a. The equilibrium price will fall; the equilibrium quantity may rise or fall.
b. The equilibrium price will rise; the equilibrium quantity may rise or fall.
c. The equilibrium quantity will fall; the equilibrium price may rise or fall.
d. The equilibrium quantity will rise; the equilibrium price may rise or fall.
e. The equilibrium price will fall; the equilibrium quantity will not change.
Refer to Figure 8-2. The economy is at full employment if
a. the quantity of labor supplied exceeds the quantity demanded
b. the quantity of labor demanded exceeds the quantity supplied
c. 130 million workers are employed
d. the real hourly wage is rising
e. we reach the maximum point on the production function
What does it mean for the government to “roll over” its debt?
a. Buying bonds from the public to pay off old bonds
b. Continuing to pay interest on old bonds
c. Issuing new bonds to pay off old bonds
d. Running a budget surplus to pay off old bonds
e. Printing money to pay off old bonds.
All of the following, except one, help explain why specialization leads to greater
production than is otherwise possible. Which is the exception?
a. It allows the organization of production in business firms.
b. Specialization reduces the time lost in moving from one activity to another.
c. As workers repeat an activity over and over, they hone their skills and become more
expert.
d. Specialization allows workers to be assigned to the activities for which they have the
greater natural ability.
e. The more often workers repeat an activity, the more stimulating and enjoyable they
find it.
Which of the following would shift the aggregate demand curve to the right?
a. Increases in government purchases, investment spending, autonomous consumption,
taxes, or the money supply
b. Increases in government purchases, investment spending, autonomous consumption,
or the money supply
c. Decreases in government purchases, investment spending, autonomous consumption,
taxes, or the money supply
d. Increases in government purchases, investment spending, autonomous consumption
or taxes
e. Decreases in government purchases or investment spending, and increases in
autonomous consumption, taxes, or the money supply.
Which of the following would increase household saving and thus equilibrium
investment spending?
a. A reduction in the investment tax credit.
b. An increase in the corporate profits tax.
c. A decrease in the capital gains tax.
d. An increase in the investment tax credit.
e. An increase in government regulation.
Which of the following would be strictly a microeconomic topic?
a. a general rise in interest rates
b. a drop in inflation
c. an increase in total production in the United States
d. a drop in the nation’s unemployment rate
e. an increase in the price of the Ford Taurus
What fraction of the labor force is cyclically unemployed when structural
unemployment is 2 percent, frictional unemployment is 2.5 percent, seasonal
unemployment is 1 percent, and the overall unemployment rate is 8 percent?
a. 2.5 percent
b. 13.5 percent
c. 4.5 percent
d. 5.5 percent
e. 8.0 percent
If the price of used automobiles increased dramatically relative to all other prices, and
the demand for all goods remained the same, which of the following would most likely
occur?
a. The GDP price index would decrease less than the CPI.
b. Both the GDP price index and the CPI would decrease.
c. The GDP price index would increase more than the CPI.
d. The CPI would increase more than the GDP price index.
e. Both the GDP price index and the CPI would increase by the same amount.
Factors that cause the CPI to exaggerate the inflation rate do not include
a. the tendency of consumers to substitute relatively cheaper goods for those that have
become relatively more expensive
b. political pressure from unions and retirees on the Bureau of Labor Statistics to
overstate the inflation rate
c. the introduction of new technologies that make it easier to obtain the same standard
of living
d. improvements over time on the quality of products
e. the increase in purchases from discount stores
By what mechanism does the economy always return to full employment after a
demand shock in the short run?
a. Wages automatically adjust themselves.
b. The interest rate automatically adjusts itself.
c. Prices automatically adjust themselves.
d. Taxes automatically adjust themselves.
e. Rents automatically adjust themselves.
A decrease in the price level leads to which of the following sequences?
a. The money demand curve shifts leftward, the interest rate drops, the aggregate
expenditure line shifts upward, and there is movement downward along the aggregate
demand curve.
b. The money demand curve shifts rightward, the interest rate increases, the aggregate
expenditure line shifts downward, and there is movement upward along the aggregate
demand curve.
c. The money demand curve shifts leftward, the interest rate drops, the aggregate
expenditure line shifts downward, and there is movement upward along the aggregate
demand curve.
d. The money demand curve shifts rightward, the interest rate increases, the aggregate
expenditure line shifts upward, and there is movement downward along the aggregate
demand curve.
e. The money demand curve shifts leftward, the interest rate drops, the aggregate
expenditure line shifts upward, and there is movement upward along the aggregate
demand curve.
In the classical model, when an open economy has balanced trade, Say’s law does not
hold.