If the public decides to hold less currency and more deposits in banks, bank reserves
a. decrease and the money supply eventually decreases.
b. decrease but the money supply does not change.
c. increase and the money supply eventually increases.
d. increase but the money supply does not change.
The concept of present value helps explain why
a. investment decreases when the interest rate increases, and it also helps explain why
the quantity of loanable funds demanded decreases when the interest rate increases.
b. investment decreases when the interest rate increases, but it is of no help in
explaining why the quantity of loanable funds demanded decreases when the interest
rate increases.
c. the quantity of loanable funds demanded decreases when the interest rate increases,
but it is of no help in explaining why investment decreases when the interest rate
increases.
d. None of the above are correct; the concept of present value is of no help in
explaining why either investment or the quantity of loanable funds demanded decreases
when the interest rate increases.
Table 28-7
Below is data about the labor market in the city of Productionville.
RefetoTable28-7.If the local government imposed a minimum wage of $8 in
Productionville, how many people would be unemployed?
a. 0
b. 2,000
c. 5,000
d. 10,000
Table24-7.The table below applies to an economy with only two goods hamburgers and
hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
RefertoTable24-7. Between 2010 and 2011, the cost of living increased by
a. 5.30 percent.
b. 6.36 percent.
c. 7.78 percent.
d. We need to know the base year in order to answer this question.
Jorge deposited $1,000 into an account three years ago. The first two years he earned 5
percent interest; the third year he earned 6 percent interest. How much money does
Jorge have in his account today?
a. $1,157.90
b. $1,168.65
c. $1,176.00
d. None of the above are correct to the nearest cent.
Figure 2-23
RefertoFigure2-23. It is possible for this economy to produce 45 doghouses and 30
dishwashers.
a. True
b. False
If a country has a trade deficit then
a. S > I and Y > C + I + G.
b. S > I and Y < C + I + G.
c. S < I and Y > C + I + G.
d. S < I and Y < C + I + G.
Senator Smith says that in order to help poor countries develop, the United States
should: 1. Prevent U.S. corporations from investing in poor countries because they take
profits that the poor countries should have; 2. Not import goods from poor countries
that use child labor; 3. Work to promote political stability in poor countries; and 4.
Reduce poor countries’ reliance on market forces in their economies. How many of
these ideas are likely to help poor countries grow?
a. 1
b. 2
c. 3
d. 4
Albert Einstein once made the following observation about science:
a. “The whole of science is nothing more than the refinement of everyday thinking.”
b. “The whole of science is nothing more than an interesting intellectual exercise.”
c. “In order to understand science, one must rely solely on abstraction.”
d. “In order to understand science, one must transcend everyday thinking.”
Unemployment insurance and welfare programs work as automatic stabilizers.
a. True
b. False
Graphs such as bar graphs and pie charts are limited in that they
a. can only show variables that are positively related.
b. can only show variables that have a negative correlation.
c. provide information on only one variable.
d. provide information on no more than two variables.
In the open-economy macroeconomic model, the supply of loanable funds comes from
a. the sum of domestic investment and net capital outflow.
b. net capital outflow alone.
c. domestic investment alone.
d. None of the above is correct.
Which of the following might explain a decrease in national saving when the tax rate on
savings is reduced?
a. its substitution effect on saving and its effect on the government budget
b. its substitution effect on saving but not its effect on the government budget
c. its effect on the government budget but not its substitution effect on saving
d. neither its substitution effect on saving nor its effect on the government budget
Nathan owns a bakery that bakes only cakes. All of his bakers work 8 hours per day. In
2011, he employed 5 bakers who produced a total of 200 cakes each day. In 2012, he
employed 6 bakers who produced a total of 249 cakes each day. The bakery’s
productivity
a. decreased by 2.33%.
b. increased by 2.33%.
c. increased by 3.75%.
d. increased by 24.50%.
If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the
inflation rate is 11 percent for 2006.
a. True
b. False
If Rrepresents the reserve ratio for all banks in the economy, then the money multiplier
is
a. 1/(1-R).
b. 1/R.
c. 1/(1+R).
d. (1+R)/R.
An economist advising a central bank intending to reduce the inflation rate would likely
point out that
a. the costs of reducing inflation persist and the costs of reducing it do not depend on
the public’s inflation expectations.
b. the costs of reducing inflation persist, but they are smaller if the public reduces its
inflation expectations.
c. the costs of reducing inflation are temporary and the costs of reducing it do not
depend on the public’s inflation expectations.
d. the costs of reducing inflation are temporary and the costs are smaller if the public
reduces its inflation expectations.
In 2002, the United States placed higher tariffs on imports of steel. According to the
open-economy macroeconomic model this policy should have
a. reduced imports into the United States and made U.S. net exports rise.
b. reduced imports into the United States and made the net supply of dollars in the
foreign exchange market shift right.
c. reduced imports of steel into the United States, but reduced U.S. exports of other
goods by an equal amount.
d. reduced imports of steel into the United States and increased U.S. exports of other
goods by an equal amount.
The goal of the consumer price index is to measure changes in the
a. costs of production.
b. cost of living.
c. relative prices of consumer goods.
d. production of consumer goods.
Other things the same, if the Fed increases the rate at which it increases the money
supply then the short-run Phillips curve shifts right in the long run.
a. True
b. False
State what, if anything, each of the following does to the supply or demand of loanable
funds.
a. net capital outflow increases at each interest rate
b. domestic investment increases at each interest rate
c. the government deficit increases
d. private saving increases
Figure 4-10
RefertoFigure4-10.The movement from Point A to Point B represents a(n)
a. shift in the supply curve.
b. decrease in the quantity supplied.
c. increase in the quantity supplied.
d. Both a and b are correct.
Figure 2-23
RefertoFigure2-23. Points B and C represent infeasible outcomes for this economy.
a. True
b. False
When the Fed announces a target for the federal funds rate, it essentially accommodates
the day-to-day fluctuations in money demand by adjusting the money supply
accordingly.
a. True
b. False
Which of the following is a subject that economists study?
a. the growth in average income
b. the fraction of the population that cannot find work
c. the rate at which prices are rising
d. All of the above are correct.
A country has a trade deficit. Its
a. net capital outflow must be positive, and saving is larger than investment.
b. net capital outflow must be positive and saving is smaller than investment.
c. net capital outflow must be negative and saving is larger than investment.
d. net capital outflow must be negative and saving is smaller than investment.
In the basket of goods that is used to compute the consumer price index, which of the
following categories of consumer spending is the largest?
a. education & communication
b. recreation
c. medical care
d. All of the above categories are about equal in magnitude.
In which of the following cases should the United States produce more noodles than it
wants for its own use and trade some of those noodles to Italy in exchange for wine?
a. Americans know less than Italians know about cooking noodles.
b. The United States has an absolute advantage over Italy in producing noodles.
c. Italy has a comparative advantage over the United States in producing wine.
d. The opportunity cost of producing a gallon of wine is the same for Italy as it is for the
United States.
The Council of Economic Advisers consists of thirty members and a staff of several
dozen economists.
a. True
b. False
Which of the following is correct?
a. The maturity of a bond refers to the amount to be paid back.
b. The principal of the bond refers to the person selling the bond.
c. A bond buyer cannot sell a bond before it matures.
d. None of the above is correct.
Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004. One of
their contributions was to argue that if a central bank could convince people to expect
zero inflation, then the Fed would be tempted to raise output by increasing inflation.
This possibility is known as
a. inflation targeting.
b. the monetary policy reaction lag.
c. the time inconsistency of policy.
d. the sacrifice ratio dilemma.
A bank’s reserve ratio is 10 percent and the bank has $5,000 in deposits. Its reserves
amount to
a. $50.
b. $500.
c. $4,500.
d. $4,950.
In the economy of Talikastan in 2015, consumption was $3000, exports were $400,
GDP was $5000, imports were $500, and investment was $1400. What were
Talikastan’s government purchases in 2015?
a. $60
b. $500
c. $700
d. $1500
The velocity of money is
a. the rate at which the Fed puts money into the economy.
b. the same thing as the long-term growth rate of the money supply.
c. the money supply divided by nominal GDP.
d. the average number of times per year a dollar is spent.
An open-market purchase
a. increases the number of dollars and the number of bonds in the hands of the public.
b. increases the number of dollars in the hands of the public and decreases the number
of bonds in the hands of the public.
c. decreases the number of dollars and the number of bonds in the hands of the public.
d. decreases the number of dollars in the hands of the public and increases the number
of bonds in the hands of the public.