Figure 4-25
The graph below pertains to the supply of paper to colleges and universities.
RefertoFigure4-25.All else equal, buyers expecting paper to be more expensive in the
future would cause a current move from
a. x to y.
b. y to x.
c. SAto SB.
d. SBto SA.
The opportunity cost of going to college is
a. the total spent on food, clothing, books, transportation, tuition, lodging, and other
expenses.
b. the value of the best opportunity a student gives up to attend college.
c. zero for students who are fortunate enough to have all of their college expenses paid
by someone else.
d. zero, since a college education will allow a student to earn a larger income after
graduation.
From the standpoint of the economy as a whole, the role of insurance is
a. to entice risk-loving people to become risk averse.
b. to promote the phenomenon of adverse selection.
c. not to eliminate the risks inherent in life, but to spread them around more efficiently.
d. not to spread risks, but to eliminate them for individual policy holders.
Figure 32-1
RefertoFigure32-1. If the real interest rate is 6 percent, the quantity of loanable funds
demanded is
a. $20 billion, and the quantity supplied is $40 billion.
b. $20 billion, and the quantity supplied is $60 billion.
c. $60 billion, and the quantity supplied is $20 billion.
d. $60 billion, and the quantity supplied is $40 billion.
Cyclical unemployment refers to
a. the relationship between the probability of unemployment and a worker’s changing
level of experience.
b. how often a worker is likely to be employed during her lifetime.
c. year-to-year fluctuations of unemployment around its natural rate.
d. long-term trends in unemployment.
An increase in the price of a good will
a. increase demand.
b. decrease demand.
c. increase quantity demanded.
d. decrease quantity demanded.
You hold currency from a foreign country. If that country has a higher rate of inflation
than the United States, then over time the foreign currency will buy
a. more goods in that country and buy more dollars.
b. more goods in that country but buy fewer dollars.
c. fewer goods in that country but buy more dollars.
d. fewer goods in that country and buy fewer dollars.
Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt
rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy
a. more milk and more T-shirts.
b. more milk and fewer T-shirts.
c. less milk and more T-shirts.
d. less milk and fewer T-shirts.
Consumer price index = 100.
a. True
b. False
Figure 33-10.
RefertoFigure33-10. If the economy starts at point A, a short-run fall in output would
be consistent with a movement to point
a. A.
b. B.
c. C.
d. D.
From the standpoint of the economy as a whole, the role of insurance is to greatly
reduce or eliminate the risks inherent in life.
a. True
b. False
The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3.
Which of the following prices for a particular good are consistent with these exchange
rates?
a. $4 in the U.S. and 3 euros in Italy.
b. $4 in the U.S. and 3.75 euros in Italy.
c. $5 in the U.S. and 3 euros in Italy.
d. $6 in the U.S. and 2.50 euros in Italy.
People who are unemployed because wages are, for some reason, set above the level
that brings labor supply and demand into equilibrium are best classified as
a. cyclically unemployed.
b. structurally unemployed.
c. frictionally unemployed.
d. discouraged workers.
The GDP deflator is the ratio of
a. real GDP to nominal GDP multiplied by 100.
b. real GDP to the inflation rate multiplied by 100.
c. nominal GDP to real GDP multiplied by 100.
d. nominal GDP to the inflation rate multiplied by 100.
Figure 2-4
RefertoFigure2-4. Unemployment could cause this economy to produce at which
point(s)?
a. Q, S
b. Q, S, T
c. R, U
d. T
A rational decisionmaker takes an action if and only if the marginal cost exceeds the
marginal benefit.
a. True
b. False
Data on the unemployment rate in the U.S. since 1960 show that the economy always
has some unemployment and that the amount changes from year to year.
a. True
b. False
Table 28-4
2010 Labor Data for Adults (ages 16 and older) in Meditor
RefetoTable28-4. What is the adult male population in Meditor?
a. 50 million
b. 90 million
c. 130 million
d. 135 million
Country A has real GDP per person of 100,000 while country B has real GDP per
person of 200,000. All else constant, country A will eventually have a higher standard
of living than country B if
a. the level of saving per person is 10,000 in country A and 10,000 in country B.
b. the level of saving per person is 12,000 in country A and 15,000 in country B.
c. Both of the above are correct.
d. None of the above are correct.
Natural resources
a. are inputs provided by nature.
b. include land, rivers, and mineral deposits.
c. take two forms: renewable and nonrenewable.
d. All of the above are correct.
Figure 34-7
RefertoFigure34-7. The aggregate-demand curve could shift from AD1to AD2as a
result of
a. an increase in government purchases.
b. a decrease in net exports.
c. households saving a smaller fraction of their income.
d. a decrease in the price level.
In the simple circular-flow diagram, who buys the factors of production?
a. households only
b. firms only
c. both households and firms
d. neither households nor firms
When inflation falls, people
a. make less frequent trips to the bank and firms make less frequent price changes.
b. make less frequent trips to the bank while firms make more frequent price changes.
c. make more frequent trips to the bank while firms make less frequent price changes.
d. make more frequent trips to the bank and firms make more frequent price changes.
In 2012, U.S. net exports were
a. positive and about 3.5 percent the size of GDP.
b. positive and about 6 percent the size of GDP.
c. negative and about 3.5 percent the size of GDP.
d. negative and about 6 percent the size of GDP.
As opposed to an increase in government expenditures, a tax cut
a. is likely to impact spending faster and according to traditional theory has a larger
multiplier.
b. is likely to impact spending faster, but according to traditional theory has a smaller
multiplier.
c. is likely to impact spending with a longer lag, but according to traditional theory has
a larger multiplier.
d. is likely to impact spending with a longer lag and according to traditional theory has
a smaller multiplier
A favorable supply shock causes the price level to
a. rise. To counter this a central bank would increase the money supply.
b. rise. To counter this a central bank would decrease the money supply.
c. fall. To counter this a central bank would increase the money supply.
d. fall. To counter this a central bank would decrease the money supply.
Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports
would
a. fall and the quantity of dollars demanded in the market for foreign-currency
exchange would fall.
b. fall and the quantity of dollars demanded in the market for foreign-currency
exchange would rise.
c. rise and the quantity of dollars demanded in the market for foreign-currency
exchange would fall.
d. rise and the quantity of dollars demanded in the market for foreign-currency
exchange would rise.
Sir Isaac Newton’s development of the theory of gravity after observing an apple fall
from a tree is an example of
a. a controlled experiment that lead to the formulation of a scientific theory.
b. being in the right place at the right time.
c. an idea whose time had come.
d. the interplay between observation and theory in science.
When the money market is drawn with the value of money on the vertical axis, the
money demand curve slopes
a. upward, because at higher prices people want to hold more money.
b. downward, because at higher prices people want to hold more money.
c. downward, because at higher price people want to hold less money.
d. upward, because at higher prices people want to hold less money.
If a country experienced deflation, then
a. the nominal interest rate would be greater than the real interest rate.
b. the real interest rate would be greater than the nominal interest rate.
c. the real interest rate would equal the nominal interest rate.
d. nominal GDP would be greater than the money supply.
The theory of liquidity preference is largely at odds with the basic ideas of supply and
demand.
a. True
b. False
Which of the following is an argument against trying to use policy to stabilize the
economy?
a. Recessions represent a waste of resources.
b. Pessimism on the part of households and firms may become a self-fulfilling
prophecy.
c. “Leaning against the wind” requires policymakers to increase aggregate demand in
recessions and reduce aggregate demand in booms.
d. Macroeconomic forecasting is not developed sufficiently to allow policymakers to
change aggregate demand at the proper time.
RefertoFigure4-27. Which of the four panels represents the market for pizza delivery
in a college town as we go from summer to the beginning of the fall semester?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
In the long run people come to expect whatever inflation rate the Fed chooses to
produce, so unemployment returns to its natural rate.
a. True
b. False