Suppose a stock market crash makes people feel poorer. This decrease in wealth would
induce people to
a. decrease consumption, which shifts aggregate supply left.
b. decrease consumption, which shifts aggregate demand left.
c. increase consumption, which shifts aggregate supply right.
d. increase consumption, which shifts aggregate demand right.
The unique point at which the supply and demand curves intersect is called
a. market harmony.
b. coincidence.
c. equivalence.
d. equilibrium.
In which case below is the real interest rate the highest?
a. the nominal interest rate = 1% and inflation = 3%
b. the nominal interest rate = 6% and inflation = 4%
c. the nominal interest rate = 2% and inflation = -1%
d. the nominal interest rate = 2% and inflation = 1%
Over the past 80 years, the overall price level in the U.S. has experienced a(n)
a. 4-fold increase.
b. 10-fold increase.
c. 13-fold increase.
d. 17-fold increase.
Suppose an economy produces two goods, food and machines. This economy always
operates on its production possibilities frontier. Last year, it produced 1000 units of
food and 47 machines. This year, it is producing 1050 units of food and 52 machines.
Which of the following events could not explain the increase in output?
a. a reduction in unemployment
b. an increase in available labor
c. an improvement in technology
d. Any of these events could explain the increase in output.
If the Fed were to unexpectedly increase the money supply, creditors would gain at the
expense of debtors.
a. True
b. False
In 1986, OPEC countries increased their production of oil. This caused
a. the price level to rise.
b. aggregate supply to shift right.
c. unemployment to rise.
d. None of the above is correct.
When the money supply decreases
a. interest rates fall and so aggregate demand shifts right.
b. interest rates fall and so aggregate demand shifts left.
c. interest rates rise and so aggregate demand shifts right.
d. interest rates rise and so aggregate demand shifts left.
Which of the following contains a list only of things that decrease when the budget
deficit of the U.S. increases?
a. U.S. net exports, U.S. domestic investment, U.S. net capital outflow
b. U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment
c. U.S. imports, U.S. interest rates, the real exchange rate of the dollar
d. None of the above is correct.
Other things the same, a decrease in the U.S. interest rate
a. induces firms to invest more.
b. shifts money demand to the left.
c. makes the U.S. dollar appreciate.
d. increases the opportunity cost of holding dollars.
Figure 2-3
RefertoFigure2-3.What is flowing from rectangle 1 to oval A?
a. revenue
b. goods and services sold
c. factors of production
d. labor, land, and capital
Which of the following is most likely to increase U.S. exports?
a. The government gives subsidies to U.S. firms that export goods or services.
b. The government reduces the size of the budget surplus.
c. The United States unilaterally reduces its restrictions on foreign imports.
d. Taxes on domestic saving rise.
Walter puts money in a savings account at his bank earning 3.5 percent. One year later
he takes his money out and notes that while his money was earning interest, prices rose
1.5 percent. Walter earned a nominal interest rate of
a. 3.5 percent and a real interest rate of 5 percent.
b. 3.5 percent and a real interest rate of 2 percent.
c. 5 percent and a real interest rate of 3.5 percent
d. 5 percent and a real interest rate of 2 percent
If purchasing-power parity holds, a dollar will buy
a. more goods in foreign countries than in the United States.
b. as many goods in foreign countries as it does in the United States.
c. fewer goods in foreign countries than it does in the United States.
d. None of the above is implied by purchasing-power parity.
We associate the term debtfinancewith
a. the bond market, and we associate the term equityfinancewith the stock market.
b. the stock market, and we associate the term equityfinancewith the bond market.
c. financial intermediaries, and we associate the term equityfinancewith financial
markets.
d. financial markets, and we associate the term equityfinancewith financial
intermediaries.
Iggie took a university teaching job as an assistant professor in 1980 at a salary of
$15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If
the price index was 82 in 1980 and 225 in 2011, then what is Iggie’s 1980 salary in 2011
dollars?
a. $5,400
b. $20,466
c. $26,158
d. $41,159
Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his
back yard. Regarding these two practices, which of the following statements is correct?
a. Only Joe’s grocery store purchases are included in GDP.
b. Only Joe’s and Jim’s grocery store purchases are included in GDP.
c. Joe’s and Jim’s grocery store purchases are included in GDP. The vegetables from
Jim’s backyard garden are included at their market value.
d. Joe’s and Jim’s grocery store purchases are included in GDP. The vegetables from
Jim’s backyard garden are included at their market value, if Jim provides this
information.
Figure 3-8
Refer to Figure3-8. If the production possibilities frontiers shown are each for one day
of production, then which of the following combinations of pounds of coffee and
pounds of soybeans could Chile and Colombia together not make in a given day?
a. 4 pounds of coffee and 17 pounds of soybeans
b. 8 pounds of coffee and 14 pounds of soybeans
c. 16 pounds of coffee and 9 pounds of soybeans
d. 24 pounds of coffee and 3 pounds of soybeans
If real output in an economy is 1,000 goods per year, the money supply is $300, and
each dollar is spent an average of 4 times per year, then according to the quantity
equation, the average price level is
a. 3.33.
b. 0.83.
c. 1.20.
d. 13.33.
Zoey wants to have about $750,000 when she retires in 10 years. She has $300,000 to
deposit now. At which of the following interest rates would Zoey’s deposit come closest
to $750,000 after 10 years?
a. 9.6 percent
b. 9.9 percent
c. 10.2 percent
d. 10.5 percent
From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made
people feel wealthier, then it would have shifted
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
It is likely that a constitutional amendment that required the government always to run a
balanced budget would
a. contribute to a more stable level of output.
b. mitigate the crowding-out effect.
c. eliminate the economy’s automatic stabilizers.
d. All of the above are correct.
If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount
of goods and services as
a. $23.86 purchased in 1965.
b. $32.47 purchased in 1965.
c. $68.00 purchased in 1965.
d. $419.12 purchased in 1965.
The short-run Phillips curve indicates that expansionary monetary policy will
temporarily raise the unemployment rate above its natural rate.
a. True
b. False
When a person engages in detailed analysis of a company to determine its value, he or
she is engaging in
a. standard deviation analysis.
b. informational analysis.
c. fundamental analysis.
d. efficiency analysis.
Figure 4-18
RefertoFigure4-18. At a price of $20, there would be a(n)
a. shortage. The law of supply and demand predicts that the price will fall from $20 to a
lower price.
b. surplus. The law of supply and demand predicts that the price will rise from $20 to a
higher price.
c. excess demand. The law of supply and demand predicts that the price will rise from
$20 to a higher price.
d. excess supply. The law of supply and demand predicts that the price will fall from
$20 to a lower price.
Suppose an economy produces only cranberries and maple syrup. In 2010, 50 units of
cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit.
In 2009, the base year, the price of cranberries was $10 per unit and the price of maple
syrup was $15 per unit. For 2010,
a. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 90.
b. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 111.1.
c. nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 90.
d. nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 111.1.
Low rates of inflation are generally associated with
a. low rates of government spending.
b. small or nonexistent government budget deficits.
c. low rates of productivity growth.
d. low rates of growth of the quantity of money.
The evidence from hyperinflations indicates that money growth and inflation
a. are positively related, which is consistent with the quantity theory of money.
b. are positively related, which is not consistent with the quantity theory of money.
c. are not related in a discernible fashion, which is consistent with the quantity theory of
money.
d. are not related in a discernible fashion, which is not consistent with the quantity
theory of money.
Which famous economist developed the principle of comparative advantage as we
know it today?
a. Adam Smith
b. David Ricardo
c. John Maynard Keynes
d. Milton Friedman
Suppose the demand for calendars increases in November. At the same time, the price
of the ink used in the production of calendars increases. In the market for calendars, if
the size of the shift of the demand curve is larger than the size of the shift of the supply
curve, then the equilibrium quantity rises.
a. True
b. False
Some economists argue that it is possible to raise the standard of living by reducing
population growth. As an economist interested in incentives rather than coercion, what
kind of policy would you recommend to slow population growth?
What would a central bank need to do to reverse the effects of a favorable supply shock
on inflation? What would its reaction do to the unemployment rate in the short run?
Figure 3-26
RefertoFigure3-26.What is Mary’s opportunity cost of one cookie?
Briefly summarize the advantages and disadvantages of unemployment insurance.
Figure 2-3
RefertoFigure2-3.What do the outer arrows represent in the figure?
Can insurance be thought of as diversification? Defend your answer.
If net exports fall, what actions could a central bank take to stabilize the economy?
Last year, total income increased $1,000 and consumption increased $800. An increase
in government spending equal to $10 would cause output to increase by $_____
because the multiplier is ______.
Table 23-12
A country produces only ice cream and cake in the quantities and prices listed below.
Use 2011 as the base year.
RefertoTable23-12. Calculate real and nominal GDP for the year 2012.
According to the classical dichotomy, what changes nominal variables? What changes
real variables?
When economists disagree about whether a policy is fair, they are expressing a
difference in
Tom’s opportunity cost of mowing a lawn is 2 loads of laundry. Jen’s opportunity cost of
mowing a lawn is 1.5 loads of laundry. What is the range of prices for mowing a lawn at
which Tom and Jen could both benefit from trade?
Other things the same, which curve in the market for foreign-currency exchange shifts
and which direction does it shift if net capital outflow rises?
In what sense is it likely that geography has an effect on a country’s rate of economic
growth?
To increase output, policymakers can _____ the money supply, _____ taxes, and/or
_____ government purchases.
The income that households have left after paying their taxes and paying for their
consumption is known as .
Using the aggregate demand and aggregate supply model, an increase in what curve is
by itself consistent with the changes in prices and output that occurred during World
War II?
Figure 23-2.
RefetoFigure23-2. List the locations associated with the flow of inputs and outputs.
Figure 33-16.
RefertoFigure33-16. Suppose the economy starts at P3and Y2. If there is a decrease in
government purchases, identify the price and output levels that the economy would
move to in the short run.