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Equilibrium quantity must increase when demand
a. increases and supply does not change, when demand does not change and supply
increases, and when both demand and supply increase.
b. increases and supply does not change, when demand does not change and supply
increases, and when both demand and supply decrease.
c. decreases and supply does not change, when demand does not change and supply
decreases, and when both demand and supply increase.
d. decreases and supply does not change, when demand does not change and supply
decreases, and when both demand and supply decrease.
More than 30 percent of U.S. workers leave their jobs in a typical month.
a. True
b. False
Bank runs and the accompanying increase in the money multiplier caused the U.S.
money supply to rise by 28 percent from 1929 to 1933.
a. True
b. False
If the reserve ratio is 100-percent, then a new deposit of $1000 into a bank account
a. eventually increases the money supply by $1000.
b. leaves the size of the money supply unchanged.
c. eventually decreases the size of the money supply by $1000.
d. eventually increases the money supply by $2000.
The nominal interest rate is 6 percent and the real interest rate is 2.5 percent. What is
the inflation rate?
a. 2.4 percent.
b. 3.5 percent.
c. 8.5 percent.
d. 15 percent.
If the Federal Reserve decreases the money supply, then initially there is a
a. shortage in the money market, so people will want to sell bonds.
b. shortage in the money market, so people will want to buy bonds.
c. surplus in the money market, so people will want to sell bonds.
d. surplus in the money market, so people will want to buy bonds.
A production possibilities frontier can shift outward if
a. government increases the amount of money in the economy.
b. there is a technological improvement.
c. resources are shifted from the production of one good to the production of the other
good.
d. the economy abandons inefficient production methods in favor of efficient
production methods.
A central bank announces it will decrease the inflation rate by 10 percentage points.
People are skeptical of the announcement, but do expect the central bank will reduce
inflation by 5 percentage points and so expected inflation falls by 5 percentage points.
If the central bank decreases inflation by only 3 percentage points then the
unemployment rate will fall.
a. True
b. False
Other things the same, domestic investment will increase a country's real GDP by more
than foreign investment.
a. True
b. False
It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers
fewer hours to produce every good than it takes German workers.
a. True
b. False
Figure30-1
RefetoFigure30-1. When the money supply curve shifts from MS1to MS2,
a. the equilibrium value of money decreases.
b. the equilibrium price level decreases.
c. the supply of money has decreased.
d. the demand for goods and services will decrease.
In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in
1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013
dollars?
a. $4,609.57
b. $4,957.51
c. $13,508.17
d. $16,008.17
Banks can hold deposits at the Federal Reserve. Balances in these accounts can be used
by banks to meet their reserve requirements, but the Fed pays no interest on these
deposits.
a. True
b. False
According to research by Robert Fogel, what proportion of the increase in the standard
of living in Britain between 1790 and 1980 can be accounted for by greater caloric
intake?
a. 10 percent
b. 20 percent
c. 30 percent
d. 40 percent
If a government increases its budget deficit, then the real exchange rate
a. and domestic investment rise.
b. and domestic investment fall.
c. rises and domestic investment falls.
d. falls and domestic investment rises.
One determinant of the natural rate of unemployment is the
a. rate of growth of the money supply.
b. minimum wage rate.
c. expected inflation rate.
d. All of the above are correct.
Reductions in transportation costs help explain the increase in U.S. trade flows.
a. True
b. False
Which of the following is correct?
a. The labor-force participation rate of women has increased in part due to smaller
families.
b. The labor-force participation rate of men has decreased in part due to men retiring
younger and living longer.
c. Both a and b are correct.
d. Neither a nor b is correct.
Identify each of the following as nominal or real variables.
a. the physical output of goods and services
b. the overall price level
c. the dollar price of apples
d. the price of apples relative to the price of oranges
e. the unemployment rate
f. the amount that shows up on your paycheck after taxes
g. the amount of goods you can purchase with the wage you get each hour
h. the taxes that you pay the government
For economists, statements about the world are of two types:
a. assumptions and theories.
b. true statements and false statements.
c. specific statements and general statements.
d. positive statements and normative statements.
Which of the following changes in the price index produces the greatest rate of
inflation: 100 to 110, 150 to 165, or 180 to 198?
a. 100 to 110
b. 150 to 165
c. 180 to 198
d. All of these changes produce the same rate of inflation.
The demand for loanable funds comes from saving and the supply of loanable funds
comes from investment.
a. True
b. False
The theory by which people optimally use all available information when forecasting
the future is known as
a. rational expectations.
b. perfect expectations.
c. credible expectations.
d. predictive expectations.
What would happen to the equilibrium price and quantity of latts if coffee shops began
using a machine that reduced the amount of labor necessary to produce steamed milk,
which is used to make latts, and scientists discovered that coffee prevents heart attacks?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the effect on equilibrium quantity would
be ambiguous.
d. The equilibrium quantity would increase, and the effect on equilibrium price would
be ambiguous.
Samuelson and Solow believed that the Phillips curve offered policymakers a menu of
possible economic outcomes.
a. True
b. False
Figure 3-18
RefertoFigure3-18. The opportunity cost of 1 cup for Bintu is
a. 1/8 bowl.
b. 1/4 bowl.
c. 4 bowls.
d. 8 bowls.
Which of the following is the most accurate statement about the effects of quality
change on the CPI?
a. Even though the BLS adjusts the prices of products in the CPI basket when the
quality of the products changes, changes in quality are still a problem because quality is
so hard to measure.
b. Because the BLS adjusts the prices of products in the CPI basket when the quality of
the products changes, changes in quality are no longer a problem for the CPI.
c. The BLS does not adjust the CPI for quality changes.
d. Most economists believe that changes in the quality of goods included in the CPI
basket do not bias the CPI as a measure of the cost of living.
In the circular-flow diagram, factors of production are the goods and services produced
by firms.
a. True
b. False
If purchasing-power parity holds but then U.S. prices rise, which of the following move
the exchange rate back towards purchasing-power parity?
a. foreign prices rise or the U.S. nominal exchange rate rises
b. foreign prices rise or the U.S. nominal exchange rate falls
c. foreign prices fall or the U.S. nominal exchange rate rises
d. foreign prices fall or the U.S. nominal exchange rate falls
If inflation is less than expected, then the unemployment rate is
a. greater than the natural rate. In the long run the short-run Phillips curve will shift
right.
b. greater than the natural rate. In the long run the short-run Phillips curve will shift left.
c. less than the natural rate. In the long run the short-run Phillips curve will shift right.
d. less than the natural rate. In the long run the short-run Phillips curve will shift left.
According to purchasing-power parity, if prices in the United States increase by a
smaller percentage than prices in the United Kingdom, then the
a. real exchange rate rises.
b. nominal exchange rate rises.
c. real exchange rate falls.
d. nominal exchange rate falls.
