Suppose your management professor has been offered a corporate job with a 30 percent
pay increase. He has decided to take the job. For him, the marginal
a. cost of leaving was greater than the marginal benefit.
b. benefit of leaving was greater than the marginal cost.
c. benefit of teaching was greater than the marginal cost.
d. All of the above are correct.
The short-run tradeoff between inflation and unemployment implies that, in the short
run,
a. a decrease in the growth rate of the quantity of money will be accompanied by an
increase in the unemployment rate.
b. an increase in the growth rate of the quantity of money will be accompanied by an
increase in the unemployment rate.
c. policymakers are able to reduce the inflation rate and, at the same time, reduce the
unemployment rate.
d. policymakers can influence the inflation rate, but not the unemployment rate.
If the Fed conducts open market sales, the equilibrium value of money decreases and
the equilibrium price level increases.
a. True
b. False
Suppose the issuer of a bond fails to pay some of the interest or principal that was
promised to the bondholders. This failure is referred to as a
a. breach.
b. default.
c. risk.
d. term failure.
To produce 100 bushels of wheat, Farmer A requires fewer inputs than does Farmer B.
We can conclude that Farmer A has an absolute advantage over Farmer B in producing
wheat.
a. True
b. False
Which of the following events would be consistent with purchasing-power parity?
a. The price level in the United States rises more rapidly than that in Ireland and the real
exchange rate defined as Irish goods per unit of U.S. goods stays the same.
b. The money supply in the United States rises more rapidly than in Egypt and the
nominal exchange rate defined as Egyptian pounds per dollar falls.
c. Earl, a worldwide traveler, looks at exchange rates and worldwide breakfast prices
one morning and finds that whatever country he decides to go to he can convert $15
into enough local currency to buy the same breakfast.
d. All of the above are correct.
If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine,
then
a. both U.S. net exports and U.S. net capital outflows rise.
b. U.S. net exports rise and U.S. net capital outflows fall.
c. U.S. net exports fall and U.S. net capital outflows rise.
d. both U.S. net exports and U.S. net capital outflows fall.
Figure 2-5
RefertoFigure2-5. This economy cannot currently produce 70 washers and 70 dryers
because
a. it is not using all of its resources.
b. it is not using the most efficient production process.
c. it does not have the resources and technology to produce that level of output.
d. All of the above are correct.
If the demand for a good falls when income falls, then the good is called an inferior
good.
a. True
b. False
Several studies in the 1990s concluded that the consumer price index overstated
inflation by about
a. 3 percentage points per year, and that number of percentage points likely still applies
now.
b. 3 percentage points per year, but recent improvements to the CPI probably have
reduced the overstatement of inflation to something less than 3 percentage points.
c. 1 percentage point per year, and that number of percentage points likely still applies
now.
d. 1 percentage point per year, but recent improvements to the CPI probably have
reduced the overstatement of inflation to something less than 1 percentage point
A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods.
Overall as a result of these transactions
a. both U.S. net capital outflow and U.S. net exports rise.
b. both U.S. net capital outflow and U.S. net exports fall.
c. U.S. net capital outflow rises and U.S. net exports fall.
d. U.S. net capital outflow falls and U.S. net exports rise.
Trade
a. allows specialization, which increases costs.
b. allows specialization, which reduces costs.
c. reduces specialization, which increases costs.
d. reduces specialization, which reduces costs.
Which of the following is an example of using the scientific method with a natural
experiment?
a. measuring how long it takes a marble to fall from a ten story building
b. comparing plant growth with and without a soil additive
c. tracking the price of oil when a war in the Middle East interrupts the flow of crude oil
d. observing the reaction when two chemicals are mixed together
Which of the following will nothelp to prevent bank runs?
a. government insurance of deposits
b. fractional reserve banking
c. 100% reserve banking
d. All of the above prevent bank runs.
Aggregate demand shifts left if
a. government purchases increase and shifts left if stock prices rise.
b. government purchases increase and shifts left if stock prices fall.
c. government purchases decrease and shifts left if stock prices rise.
d. government purchases decrease and shifts left is stock prices fall.
Figure 3-6
Refer to Figure3-6. If Daisy must work 2.5 hours to make each pie, then her
production possibilities frontier is based on how many hours of work?
a. 6 hours
b. 7.5 hours
c. 37.5 hours
d. 50 hours
Suppose that some country had an adult population of about 50 million, a labor-force
participation rate of 60 percent, and an unemployment rate of 5 percent. How many
people were unemployed?
a. 1.425 million
b. 1.5 million
c. 2.5 million
d. 5 million
Foreign-produced goods and services that are purchased domestically are called
a. imports.
b. exports.
c. net imports.
d. net exports.
The market supply curve shows how the total quantity supplied of a good varies as
input prices vary, holding constant all the other factors that influence producers’
decisions about how much to sell.
a. True
b. False
An increase in the expected price level shifts the
a. short-run and long-run aggregate supply curves left.
b. the short-run but not the long-run aggregate supply curve left.
c. the long-run but not the short-run aggregate supply curve left.
d. neither the long-run nor the short-run aggregate supply curve left.
When Ukraine trades with Italy,
a. both countries are likely made better off.
b. only Italy benefits since Ukraine can produce all goods at a higher level of quality
than Italy.
c. only Ukraine benefits since Italy’s low wages guarantee that Italian firms will be
profitable regardless of trade.
d. neither country will benefit since Ukraine is more efficient than Italy in the
production of all goods.
In the 19th century John Deere took out a patent on a newly designed plow that
incorporated steel to make plowing faster. Many farmers bought plows from his
company and he made millions. This example shows that patents turn an idea into a
a. public good.
b. societal good.
c. private good.
d. normal good.
Which of the following would bothraise the U.S. exchange rate?
a. capital flight from other countries to the U.S. occurs and the U.S. moves from budget
surplus to budget deficit
b. capital flight from other countries to the U.S. occurs and the U.S. moves from budget
deficit to budget surplus
c. capital flight from the U.S. to other countries occurs, the U.S. moves from budget
surplus to budget deficit
d. capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit
to budget surplus
Most studies indicate that tobacco and marijuana tend to be
a. substitutes.
b. complements.
c. unrelated because one good is legal while the other one is illegal.
d. inferior goods.
An increase in the price level and a reduction in output would result from
a. an increase in the money supply.
b. an increase in government expenditures.
c. a fall in stock prices.
d. bad weather in farm states.
In the open-economy macroeconomic model, if investment demand decreases, then
a. the supply of dollars in the market for foreign-currency exchange shifts left.
b. the supply of dollars in the market for foreign-currency exchange shifts right.
c. the demand for dollars in the market for foreign-currency exchange shifts left.
d. the demand for dollars in the market for foreign-currency exchange shifts right.
For which of the following individuals would the opportunity cost of going to college
be highest?
a. a promising young mathematician who will command a high salary once she earns
her college degree
b. a student with average grades who has never held a job
c. a famous, highly-paid actor who wants to take time away from show business to
finish college and earn a degree
d. a student who is the best player on his college basketball team, but who lacks the
skills necessary to play professional basketball
Sheamous loses his job and decides to sit on the beach rather than look for work during
the next few months. Other things the same,the unemployment rate
a. increases, and the labor-force participation rate decreases.
b. increases, and the labor-force participation rate is unaffected.
c. is unaffected, and the labor-force participation rate decreases.
d. and the labor-force participation rate are both unaffected.
Stocks and bonds
a. and checking accounts are all stores of value and commonly function as mediums of
exchange.
b. and checking accounts are all stores of value, but only stocks and bonds commonly
function as mediums of exchange.
c. and checking accounts are all stores of value, but only checking accounts commonly
function as mediums of exchange.
d. and checking accounts all commonly function as mediums of exchange, but only
stocks and bonds are a store of value.
The term loanablefundrefers to all income that is not used for consumption.
a. True
b. False
The art in scientific thinking — whether in chemistry, economics, or biology — is
a. the design and implementation of laboratory experiments.
b. knowing when to stop collecting data and when to start analyzing the data.
c. deciding which assumptions to make.
d. being able to mathematically model natural phenomena.
In the U.S., when the price of oil rises, the CPI rises by much more than does the GDP
deflator.
a. True
b. False
In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county
restored the courthouse for about $1.7 million. A price index for nonresidential
construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these
numbers, the hospital cost about
a. $2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration
in 2000 dollars.
b. $2.1 million in 2000 dollars, which is more than the cost of the courthouse
restoration in 2000 dollars.
c. $2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration
in 2000 dollars.
d. $2.6 million in 2000 dollars, which is more than the cost of the courthouse
restoration in 2000 dollars.
As a student, Anne spends 40 hours per week writing term papers and completing
homework assignments. On one axis of her production possibilities frontier is measured
the number of term papers written per week. On the other axis is measured the number
of homework assignments completed per week. Anne’s production possibilities frontier
is a straight line if
a. she faces no trade-off between writing term papers and completing homework
assignments.
b. she can switch between writing term papers and completing homework assignments
at a constant rate.
c. the rate at which she can switch between homework assignments and term papers
depends on the number of homework assignments she is completing and on the number
of term papers she is writing.
d. she is required by her professors to spend half of her time on term papers and the
other half of her time on homework assignments.
In the long run, if the Fed decreases the growth rate of the money supply,
a. inflation will be lower.
b. unemployment will be higher.
c. real GDP will be lower.
d. All of the above are correct.