Suppose that the real exchange rate between the United States and Brazil is defined in
terms of baskets of goods. Other things the same, which of the following will increase
the real exchange rate (that is increase the number of baskets of Brazilian goods a
basket of U.S. goods buys)?
a. an increase in the quantity of Brazilian currency that can be purchased with a dollar
b. a decrease in the price of U.S. goods
c. an increase in the price in Brazilian currency of Brazilian goods
d. All of the above are correct.
When the U.S. real interest rate falls, purchasing U.S. assets becomes
a. less attractive and so U.S. net capital outflow rises.
b. less attractive and so U.S. net capital outflow falls.
c. more attractive and so U.S. net capital outflow rises.
d. more attractive and so U.S. net capital outflow falls.
Suppose that the adult population is 4 million, the number of unemployed is 0.25
million, and the labor-force participation rate is 75%. What is the unemployment rate?
a. 6.25%
b. 8.3%
c. 9.1%
d. 18.75%
In a given market, how are the equilibrium price and the market-clearing price related?
a. There is no relationship.
b. They are the same price.
c. The market-clearing price exceeds the equilibrium price.
d. The equilibrium price exceeds the market-clearing price.
According to fundamental analysis, when choosing stocks for your portfolio, you
should prefer undervalued stocks.
a. True
b. False
During 2011, the price level in the U.S. rose at a faster rate than the price level in Japan.
Other things the same, according to purchasing-power parity, this difference in inflation
rates should have caused
a. the nominal exchange rate of the dollar to appreciate relative to the yen.
b. the real exchange rate of the dollar to appreciate relative to the yen.
c. the nominal exchange rate of the dollar to depreciate relative to the yen.
d. the real exchange rate of the dollar to depreciate relative to the yen.
Today, people changed their expectations about the future. This change
a. can cause a movement along a demand curve.
b. can affect future demand but not today’s demand.
c. can affect today’s demand.
d. cannot affect either today’s demand or future demand.
Suppose a basket of goods and services has been selected to calculate the CPI and 2009
has been selected as the base year. In 2007, the basket’s cost was $64; in 2009, the
basket’s cost was $68; and in 2011, the basket’s cost was $70. The value of the CPI in
2011 was
a. 97.14.
b. 100.10.
c. 102.94.
d. 109.38.
Other things the same, if technology increases, then in the long run
a. both output and prices are higher.
b. output is higher and prices are lower.
c. output is lower and prices are higher.
d. both output and prices are lower.
Countries that have lower levels of real GDP per person than the United States
a. tend to have growth rates that are higher than that of the United States.
b. tend to have growth rates that are about the same as that of the United States.
c. tend to have growth rates that are lower than that of the United States.
d. in some cases have growth rates that are higher than that of the United States and in
other cases lower than that of the United States.
Because the consumer price index reflects the goods and services bought by consumers
better than the GDP deflator does, it is the more common gauge of inflation.
a. True
b. False
An increase in government spending financed by borrowing changes people’s
expectations about future taxation such that current consumption expenditures
a. fall. The increase in expenditures makes it likely that future taxes will create smaller
distortions.
b. fall. The increase in expenditures makes it likely that future taxes will create larger
distortions.
c. rise. The increase in expenditures makes it likely that future taxes will create smaller
distortions.
d. rise. The increase in expenditures makes it likely that future taxes will create larger
distortions.
Figure 4-11
RefertoFigure4-11. The movement from point A to point B on the graph is caused by
a. a decrease in the price of the good.
b. an increase in the price of the good.
c. an advance in production technology.
d. a decrease in input prices.
Figure 33-5.
RefertoFigure33-5. The shift of the short-run aggregate-supply curve from SRAS1to
SRAS2
a. could be caused by an outbreak of war in the Middle East.
b. could be caused by a decrease in the expected price level.
c. causes the economy to experience an increase in the unemployment rate.
d. causes the economy to experience stagflation.
If the price level rises, then
a. the interest rate falls and spending on goods and services falls.
b. the interest rate falls and spending on goods and services rises.
c. the interest rate rises and spending on goods and services falls.
d. the interest rate rises and spending on goods and services rises.
The bond market, the stock market, banks, pension funds, and insurance companies are
all financial
a. systems.
b. markets.
c. institutions.
d. intermediaries.
Which of the following is an example of an externality?
a. A paper mill dumps waste into the river.
b. A neighbor’s loud music disrupts sleep.
c. A drunk driver causes an accident that injures another person.
d. All of the above are correct.
When the money market is drawn with the value of money on the vertical axis, long-run
equilibrium is obtained when the quantity demanded and quantity supplied of money
are equal due to adjustments in
a. nominal interest rates.
b. real interest rates.
c. the price level.
d. the money supply.
Who of the following would be included in the Bureau of Labor Statistics’
“unemployed” category?
a. Juan Carlos, a full-time student who is not looking for work
b. Kevin, who is on temporary layoff
c. Andrea, who has retired and is not looking for work
d. All of the above are correct.
If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is
a. 104.1 so prices are higher than in the base year.
b. 104.1 so prices are lower than in the base year.
c. 96.1 so prices are higher than in the base year.
d. 96.1 so prices are lower than in the base year.
Figure 23-1.
RefertoFigure23-1. Which of the following correctly identifies the flow of dollars?
a. W, X, Y and Z
b. K, M, L and N
c. C, K, M and D
d. A, L, N and B
Which of the following would shift the supply of dollars in the market for
foreign-currency exchange of the open- economy macroeconomic model to the left?
a. the exchange rate rises
b. the exchange rate falls
c. the expected rate of return on U.S. assets rises
d. the expected rate of return on U.S. assets falls
Halvorson Construction has an investment project that would cost $150,000 today and
yield a one-time payoff of $167,000 in three years. What is the highest interest rate at
which Halvorson would find this project profitable?
a. 7%
b. 6%
c. 5%
d. It is not profitable at any of these interest rates.
The mainstream view among economists is that
a. society faces a tradeoff between unemployment and inflation, but only in the short
run.
b. society faces a tradeoff between unemployment and inflation, but only in the long
run.
c. society faces a tradeoff between unemployment and inflation, both in the short run
and in the long run.
d. no tradeoff exists between unemployment and inflation, either in the short run or in
the long run.
At which interest rate is the present value of $360 three years from today equal to about
$310 today?
a. 4.7 percent
b. 5.1 percent
c. 5.5 percent
d. 5.9 percent
Many economists believe that the theory of purchasing-power parity describes the
forces that determine exchange rates in the long run.
a. True
b. False
The idea that expansionary fiscal policy has a positive affect on investment is known as
a. monetary policy.
b. crowding out.
c. the investment accelerator.
d. the multiplier.
The Bureau of Labor Statistics produces data on unemployment and other aspects of the
labor market from a regular survey of households called the
a. Census.
b. Labor Survey.
c. Survey of Economic Indicators.
d. Current Population Survey.
According to economist John Maynard Keynes, a great economist must also be a(n)
a. mathematician.
b. historian.
c. philosopher.
d. All of the above are correct.
Diminishing marginal utility of wealth implies that the utility function
a. has increasing slope and a person is risk averse.
b. has increasing slope and a person is not risk averse.
c. has decreasing slope and a person is risk averse
d. has decreasing slope and a person is not risk averse.
A nation has a positive net capital outflow. Which of the following is correct?
a. Purchases of foreign assets by domestic residents exceed purchases of domestic
assets by foreigners
b. It has positive net exports.
c. Its savings exceeds its domestic investment.
d. All of the above are correct.