A likely example of substitute goods for most people would be
a. tables and chairs.
b. bicycles and helmets.
c. apple juice and orange juice.
d. coffee and sugar.
U.S. GDP includes the market value of rental housing, but not the market value of
owner-occupied housing services.
a. True
b. False
Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the right-hand diagram, “Inf Rate” means
“Inflation Rate.”
RefertoFigure35-9. The shift of the aggregate-supply curve from AS1to AS2
a. results in a more favorable trade-off between inflation and unemployment.
b. results in a more favorable trade-off between inflation and the growth rate of real
GDP.
c. represents an adverse shock to aggregate supply.
d. represents a favorable shock to aggregate supply.
The supply of money increases when
a. the price level falls.
b. the interest rate increases.
c. the Fed makes open-market purchases.
d. money demand increases.
When the money market is drawn with the value of money on the vertical axis, the price
level decreases if
a. either money demand or money supply shifts right.
b. either money demand or money supply shifts left.
c. money demand shifts right or money supply shifts left.
d. money demand shifts left or money supply shifts right.
The Bureau of Labor Statistics reported in 2005 that there were 50.40 million people
over age 25 whose highest level of education was some college or an associate degree,
33.86 million of whom were employed and 1.27 million of whom were unemployed.
What were the labor-force participation rate and the unemployment rate for this group?
a. 69.7% and 2.5%
b. 69.7% and 3.6%
c. 67.2% and 2.5%
d. 67.2% and 3.6%
An increase in the budget deficit would cause a
a. shortage of loanable funds at the original interest rate, which would lead to falling
interest rates.
b. surplus of loanable funds at the original interest rate, which would lead to rising
interest rates.
c. shortage of loanable funds at the original interest rate, which would lead to rising
interest rates.
d. surplus of loanable funds at the original interest rate, which would lead to falling
interest rates.
A rapid increase in the number of workers, other things the same, is likely in the short
term to
a. raise real GDP per person, but decrease real GDP.
b. decrease both real GDP and real GDP per person.
c. raise both real GDP and real GDP per person.
d. raise real GDP, but decrease real GDP per person.
Economists disagree as to whether
a. the stock price of a company should reflect the company’s expected profitability.
b. the basic tools of finance reflect valid ideas.
c. stock prices reflect rational estimates of a company’s true worth.
d. there is any relationship between stock market fluctuations and fluctuations in the
economy more broadly.
Almost all economists agree that tariffs and import quotas
a. reduces general economic welfare.
b. increases general economic welfare.
c. have no effect on general economic welfare.
d. stimulate a less than fully employed economy.
In a competitive market, the quantity of each good produced and the price at which it is
sold are not determined by any single buyer or seller.
a. True
b. False
The Bureau of Labor Statistics produces data on
a. unemployment.
b. types of employment.
c. length of the average workweek.
d. All of the above are correct.
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.
Refer to Table3-21. Assume that Jamaica and Norway each has 4 days available for
production. Originally, each country divided its time equally between the production of
coolers and radios. Now, each country spends all its time producing the good in which it
has a comparative advantage. As a result, the total output of coolers increased by
a. 12.
b. 24.
c. 36.
d. 48.
Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of
goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen.
Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the
real exchange rate would
a. appreciate which by itself would make U.S. net exports fall.
b. appreciate which by itself would make U.S. net exports rise.
c. depreciate which by itself would make U.S. net exports fall.
d. depreciate which by itself would make U.S. net exports rise.
Diminishing marginal utility of wealth implies that the utility function is
a. upward-sloping and has decreasing slope.
b. upward-sloping and has increasing slope.
c. downward-sloping and has decreasing slope.
d. downward-sloping and has increasing slope.
An added benefit of inflation is that it allows for the possibility of
a. menu costs.
b. aggregate supply shocks.
c. negative real interest rates.
d. recessions.
At the end of 2011 the U.S. government had a debt of about $10.12 trillion. During
2012 inflation was about 2.5% and real GDP grew about 1.6%. What is the largest
deficit the government could have had in 2012 without raising the ratio of debt to GDP?
a. about 414.9 billion
b. about 404.8 billion
c. about 253.0 billion
d. about 161.9 billion
The Bureau of Labor Statistics does not try to account for quality changes in the goods
and services in the basket used to compute the CPI.
a. True
b. False
Other things the same, an increase in the U.S. interest rate causes the quantity of
loanable funds supplied to
a. rise because national saving rises.
b. rise because domestic investment rises.
c. fall because national saving falls.
d. fall because domestic investment falls.
Over the past century, the average income in the United States has risen about
a. twofold.
b. fivefold.
c. eightfold.
d. tenfold.
Table 3-29
Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
RefertoTable3-29.Juanita has an absolute advantage in
a. programming cellular phones and a comparative advantage in programming cellular
phones.
b. programming cellular phones and a comparative advantage in testing cellular phones.
c. testing cellular phones and a comparative advantage in programming cellular phones.
d. testing cellular phones and a comparative advantage in testing cellular phones.
Central planning refers to
a. markets guiding economic activity. Today many countries that had this system have
abandoned it.
b. markets guiding economic activity. Today many countries that did not have this
system have implemented it.
c. government guiding economic activity. Today many countries that had this system
have abandoned it.
d. government guiding economic activity. Today many countries that did not have this
system have implemented it.
In 2007 and 2008 households and firms reduced desired expenditures. During the same
period inflation fell and unemployment rose.
a. The change in inflation, but not the change in unemployment is consistent with what
a given short-run Phillips curve implies.
b. The change in unemployment, but not the change in inflation is consistent with what
a given short-run Phillips curve implies.
c. Both the change in inflation and the change in unemployment are consistent with
what a given short-run Phillips curve implies.
d. Neither the change in inflation nor the change in unemployment are consistent with
what a given short-run Phillips curve implies.
If the reserve requirement is 10 percent, which of the following pairs of changes would
both allow a bank to lend out an additional $10,000?
a. the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank
b. the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000
c. the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank
d. the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000
The government computes measures of income other than GDP because these other
measures usually tell different stories about overall economic conditions.
a. True
b. False
If the unemployment rate falls below its long-run level, which policies would be
appropriate to stabilize output?
a. increase the money supply, increase taxes
b. increase the money supply, cut taxes
c. decrease the money supply, increase taxes
d. decrease the money supply, cut taxes
What is the present value of a payment of $1,000 two years from now if the interest rate
is 6%?
a. $2,000/1.06
b. $1000/(1.06)2
c. $1000/(1 + 0.062)
d. None of the above are correct.
Other things the same, the aggregate quantity of output supplied will increase if the
price level
a. is lower than expected so that firms believe the relative price of their output has
increased.
b. is lower than expected so that firms believe the relative price of their output has
decreased.
c. is higher than expected so that firms believe the relative price of their output has
increased.
d. is higher than expected so that firms believe the relative price of their output has
decreased.
In 2009, based on concepts similar to those used to estimate U.S. employment figures,
the Japanese adult non- institutionalized population was 110.272 million, the labor force
was 65.362 million, and the number of people employed was 62.242 million. According
to these numbers, the Japanese labor-force participation rate and unemployment rate
were about
a. 56.4% and 2.8%.
b. 56.4% and 4.8%.
c. 59.3% and 2.8%.
d. 59.3% and 4.8%.
Which of the following shifts aggregate demand to the right?
a. an increase in the price level
b. an increase in the money supply
c. a decrease in the price level
d. a decrease in the money supply
Which of the following might explain a decrease in national saving when the tax rate on
savings is reduced?
a. its income effect on saving and its effect on the government budget
b. its income effect on saving but not its effect on the government budget
c. its effect on the government budget but not its income effect on saving
d. neither its income effect on saving nor its effect on the government budget
In a closed economy, if Y,C,and T remained the same, a decrease in G would
a. reduce private saving and public saving.
b. increase private saving but not public saving.
c. increase public saving but not private saving.
d. increase neither private nor public saving.