RefertoFigure35-7. The economy would move from C to B
a. in the short run if money supply growth increased unexpectedly.
b. in the short run if money supply growth decreased unexpectedly.
c. in the long run if money supply growth increases.
d. in the long run if money supply growth decreases.
The “yardstick” people use to post prices and record debts is called
a. a medium of exchange.
b. a unit of account.
c. a store of value.
d. liquidity.
Figure 4-13
RefertoFigure4-13.If Producer A and Producer B are the only producers in the market,
then the market quantity supplied when the price is $6 is
a. 4 units.
b. 6 units.
c. 12 units.
d. 18 units.
If a share of stock in Skylight Chili sells for $75, the retained earnings per share are $5,
and the dividend per share is $2, then the price-earnings ratio is 15.
a. True
b. False
Advocates of unions contend that unions are a necessary antidote to the market power
of the firms that hire workers and that unions are important for helping firms respond
efficiently to workers’ concerns.
a. True
b. False
GDP per person tells us the income and expenditure of the
a. richest person in the economy.
b. poorest person in the economy.
c. average person in the economy.
d. entire economy.
During the financial crisis Congress and President Obama authorized tax cuts and
increases in government spending.
According to the Phillips curve, in the short run these policies should have
a. reduced inflation and unemployment.
b. raised inflation and unemployment.
c. reduced inflation and raised unemployment.
d. raised inflation and reduced unemployment.
A typical American worker covered by unemployment insurance receives 50 percent of
his former wages for 52 weeks.
a. True
b. False
If, at the current price, there is a surplus of a good, then
a. sellers are producing more than buyers wish to buy.
b. the market must be in equilibrium.
c. the price is below the equilibrium price.
d. quantity demanded equals quantity supplied.
Which of the following is correct if the interest rate is 6 percent?
a. $215 to be received a year from today has a present value of over $200; $420 a year
from now has a present value over $400.
b. $215 to be received a year from today has a present value of over $200; $420 a year
from now has a present value under $400.
c. $215 to be received a year from today has a present value of under $200; $420 a year
from now has a present value over $400.
d. $215 to be received a year from today has a present value of under $200; $420 a year
from now has a present value under $400.
In the early 19th century, the Russian government sent doctors to southern Russian
villages to provide assistance during a cholera epidemic. The villagers noticed that
wherever doctors appeared, people died. Therefore, many doctors were chased away
from villages, and some were even killed. This reaction to the correlation between
doctors and deaths is most likely a problem of
a. omitted variables.
b. reverse causality.
c. government propaganda.
d. medical incompetence.
Which of the following is an important advantage of discretionary monetary policy?
a. Influencing the political business cycle
b. Flexibility to deal with changing economic conditions
c. Limiting the opportunities for abuse of power by policymakers
d. Avoidingthemeinconsistencyofpolicyproblem
The level of real GDP person
a. differs widely across countries, but the growth rate of real GDP per person is similar
across countries.
b. is very similar across countries, but the growth rate of real GDP per person differs
widely across countries.
c. and the growth rate of real GDP per person are similar across countries.
d. and the growth rate of real GDP per person vary widely across countries.
Tim put $275 in the bank one year ago and forgot about it. Today, the bank sent Tim a
statement indicating that he now has $294.25 in his account. What interest rate did Tim
earn?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
When taxes increase, consumption
a. increases, so aggregate demand shifts right.
b. increases, so aggregate supply shifts right.
c. decreases, so aggregate demand shifts left.
d. decreases, so aggregate supply shifts left.
Which of the following would increase productivity?
a. an increase in the physical capital stock per worker
b. an increase in human capital per worker
c. an increase in natural resources per worker
d. All of the above are correct.
Table29-7.
RefetoTable29-7. Assuming the Bank of Springfield and all other banks have the same
reserve ratio, then what is the value of the money multiplier?
a. 1.1
b. 12.3
c. 8.1
d. 9.1
If prices in Mexico rise at a higher rate than prices in the U.S., then according to
purchasing-power parity the U.S. nominal exchange rate with Mexico should rise.
a. True
b. False
Table 3-21
Assume that Jamaica and Norway can switch between producing coolers and producing
radios at a constant rate. The following table shows the number of coolers or number of
radios each country can produce in one day.
RefertoTable3-21.Jamaica has an absolute advantage in the production of
a. coolers and Norway has an absolute advantage in the production of radios.
b. radios and Norway has an absolute advantage in the production of coolers.
c. both goods and Norway has an absolute advantage in the production of neither good.
d. neither good and Norway has an absolute advantage in the production of both goods.
If suppliers expect the price of their product to fall in the future, then they will
a. decrease supply now.
b. increase supply now.
c. decrease supply in the future but not now.
d. increase supply in the future but not now.
Which of the following is nota question addressed by macroeconomists?
a. Why is average income high in some nations but low in others?
b. What, if anything, can the government do to promote growth in incomes, low
inflation, and stable employment?
c. What is the impact of foreign competition on the U.S. auto industry?
d. Why do production and employment expand in some years and contract in others?
A U.S. bank wants to buy euros in order to buy German bonds. In the open-economy
macroeconomic model, this transaction would be part of
a. the supply of currency in the foreign exchange market, and part of the supply of
loanable funds.
b. the demand for currency in the foreign exchange market, and part of the supply of
loanable funds.
c. the supply of currency in the foreign exchange market, and part of the demand for
loanable funds.
d. the demand for currency in the foreign exchange market, and part of the demand for
loanable funds.
The term “market failure”
a. means the same thing as “market power.”
b. refers to the dissolution of a market when firms decide to quit producing a certain
product.
c. refers to the failure of a market to produce an efficient allocation of resources.
d. refers to government’s failure to enforce the property rights of households or firms
that participate in a certain market.
Figure 3-16
RefertoFigure3-16.Hosne’s opportunity cost of one purse is
a. 4/5 wallet and Merve’s opportunity cost of one purse is 2/3 wallet.
b. 4/5 wallet and Merve’s opportunity cost of one purse is 3/2 wallets.
c. 5/4 wallets and Merve’s opportunity cost of one purse is 2/3 wallet.
d. 5/4 wallets and Merve’s opportunity cost of one purse is 3/2 wallets.
Figure 2-23
Refer to Figure2-23. Given the technology available for manufacturing doghouses and
dishwashers, this economy does not have enough of the factors of production to support
the level of output represented by point C.
a. True
b. False
When can two countries gain from trading two goods?
a. when the first country can only produce the first good and the second country can
only produce the second good
b. when the first country can produce both goods, but can only produce the second good
at great cost, and the second country can produce both goods, but can only produce the
first good at great cost
c. when the first country is better at producing both goods and the second country is
worse at producing both goods
d. Two countries could gain from trading two goods under all of the above conditions.
GDP does not directly measure those things that make life worthwhile, but it does
measure our ability to obtain many of the inputs into a worthwhile life.
a. True
b. False
Foreign direct investment and domestic investment have the same effect on all
measures of economic prosperity.
a. True
b. False
Table 23-2
The table below contains data for country A for the year 2010.
RefertoTable23-2.What were country A’s exports in 2010?
a. -$32
b. $32
c. $88
d. $120
In one year, you meet 52 people who are each unemployed for one week and eight
people who are each unemployed for the whole year. What percentage of the
unemployment spells you encountered was short term, and what percentage of the
unemployment you encountered in a given week was long term?
a. 52% was short term; 13.3% was long term
b. 52% was short term; 88.9% was long term
c. 86.7% was short term; 13.3 was long term
d. 86.7% was short term; 88.9 was long term
What would happen in the market for loanable funds if the government were to increase
the tax on interest income?
a. The supply of loanable funds would shift right.
b. The demand for loanable funds would shift right.
c. The supply of loanable funds would shift left.
d. The demand for loanable funds would shift left.
More flexible labor markets will shift
a. both the long-run Phillips curve and the long-run aggregate supply curve to the right.
b. both the long-run Phillips curve and the long-run aggregate supply curve to the left.
c. the long-run Phillips curve to the right and the long-run aggregate supply curve to the
left.
d. the long-run Phillips curve to the left and the long-run aggregate supply curve to the
right.
List one specific policy that would shift the long-run Phillips curve to the right.
When a country imposes tariffs, intending to protect domestic firms from foreign
competition, it is pursuing_______”oriented policies.
In the early 1920s U.S. consumer prices fell, while Germany experienced
hyperinflation. According to the ideas of shoeleather costs and menu costs, U.S.
households (relative to German households) made _____ frequent trips to the bank and
U.S. firms changed prices _____ frequently.
What is meant by accommodation?
Explain the distinction between technological knowledge and human capital.
For a given short-run Phillips curve, if expected inflation is 10% but actual inflation is
8%, is the unemployment rate above or below its natural rate?
Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve
requirement. What is the amount of excess reserves?
What did Friedman and Phelps predict would happen if policymakers tried to move the
economy upward along the Phillips curve? Did the behavior of the economy in the late
1960s and the 1970s prove them wrong?
Consumer spending in what category is the largest component of the CPI?
According to political business cycle theory, if the Fed wanted to increase the chances
of a President’s reelection, what specific actions might it take?
Why are net exports and net capital outflow always equal?
Suppose the McCormick Corporation releases an earnings report that fails to meet the
market’s expectations. What does the efficient markets hypothesis predict will happen to
McCormick’s stock price?
List two reasons why the Fed cannotcontrol the exact size of the money supply.
Explain how unemployment insurance acts as an automatic stabilizer.
Monetary policy affects aggregate demand with a lag. Approximately how long does it
take for monetary policy actions to affect aggregate demand?
In 2010 a country had nominal GDP of 6 trillion euro and real GDP of 5 trillion euro. In
2011 it had nominal GDP of 6.5 trillion euro and real GDP of 5.2 trillion euro. What
was its inflation rate in 2011? Show your work.
Which one of the factors of production originates as an output from the production
process, and is subsequently used as an input into the production process?
If the Federal Reserve’s goal is to stabilize aggregate demand, then it will the money
supply in response to a stock market boom. This causes interest rates to .