If the stock market booms, then
a. aggregate demand increases, which the Fed could offset by increasing the money
supply.
b. aggregate supply increases, which the Fed could offset by increasing the money
supply.
c. aggregate demand increases, which the Fed could offset by decreasing the money
supply.
d. aggregate supply increases, which the Fed could offset by decreasing the money
supply.
Table 3-24
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
RefertoTable3-24. The opportunity cost of 1 unit of cheese for Spain is
a. 1/2 unit of bread.
b. 2 hours of labor.
c. 2 units of bread.
d. 4 hours of labor.
Which list ranks assets from most to least liquid?
a. currency, fine art, stocks
b. currency, stocks, fine art
c. fine art, currency, stocks
d. fine art, stocks, currency
When the Federal Open Market Committee meets it
a. looks only at the state of economy to determine how to conduct monetary operations
in order to follow the monetary policy rule set by law.
b. looks at the state of the economy and economic forecasts to determine how to
conduct monetary operations in order to follow the monetary policy rule set by law.
c. looks only at the state of the economy to determine the target it will set for the federal
funds rate.
d. looks at the state of the economy and economic forecasts to determine the target it
will set for the federal funds rate.
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 $8 is
a. 8 units.
b. 16 units.
c. 24 units.
d. 32 units.
Table 3-36
Refer to Table3-36. If Antigua and Barbuda decide to trade with each other, Antigua
should specialize in the production of
a. towels and Barbuda should specialize in the production of umbrellas.
b. umbrellas and Barbuda should specialize in the production of towels.
c. both goods and Barbuda should specialize in the production of neither good.
d. neither good and Barbuda should specialize in the production of both goods.
In 2012, the imaginary nation of Dorados had a population of 8,000 and real GDP of
3,000,000. During the year its real GDP grew by about 2.9%. Which of the following
sets of growth rates is consistent with this growth in real GDP?
a. 2% population growth and 6% real GDP growth
b. 6% population growth and 2% real GDP growth
c. 4% population growth and 7% real GDP growth
d. 7% population growth and 4% real GDP growth
Nominal GDP measures output of final goods and services in physical terms.
a. True
b. False
From the early 1980’s through the 1990’s, the nominal interest rate
a. fell because the Fed got inflation under control.
b. fell because the Fed let inflation get out of control.
c. rose because the Fed got inflation under control.
d. rose because the Fed let inflation get out of control.
During the 2008-2009 unemployment rose from about 4.4% to about
a. 6%
b. 8%
c. 10%
d. 12%
During some year a country had exports of $50 billion, imports of $70 billion, and
domestic investment of $100 billion. What was its saving during the year?
a. $80 billion
b. $100 billion
c. $120 billion
d. $150 billion
Java Hut, a U.S. coffee retailer, buys $10 million worth of coffee beans from Colombia.
It also pays $5 million for paper cups and utilities, all produced in the U.S. It sells the
coffee it produces using the above inputs to U.S. consumers for $50 million. Overall
how do these expenditure affect net exports? How do these expenditures effect U.S.
consumption?
Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because
people and households are less able to borrow, they spend less at any given price level
than they would otherwise. The crisis is persistent so lending should remain depressed
for some time.
RefertoFinancialCrisis.How is the new long-run equilibrium different from the
original one?
a. both price and real GDP are higher.
b. both price and real GDP are lower.
c. the price level is the same and GDP is lower.
d. the price level is lower and real GDP is the same.
In 2010, real GDP per person in Bangladesh was
a. about 3 times as high as it was in the U.S. in 1870.
b. about twice as high as it was in the U.S. in 1870.
c. about the same as it was in the U.S. in 1870.
d. less than it was in the U.S. in 1870.
Within the U.S. population, women of prime working age (ages 25-54) have higher
rates of unemployment than men of prime working age (ages 25-54), regardless of race.
a. True
b. False
Points on the production possibilities frontier represent efficient levels of production.
a. True
b. False
The labor-force participation rate equals the percentage of the total adult population that
is in the labor force.
a. True
b. False
Within the U.S. population, women of prime working age (ages 25-54) have similar
rates of labor-force participation than men of prime working age (ages 25-54),
regardless of race.
a. True
b. False
With respect to the consumer price index, the substitutiobiaarises because
a. prices of goods and services do not change in the same proportion from year to year.
b. consumers are slow to adjust their buying patterns from year to year in response to
price changes.
c. consumers are eager to buy new products as they are introduced, despite their lack of
full information about the quality of those products until they buy and use them.
d. All of the above are correct.
Assume an economy experienced a positive rate of inflation between 2003 and 2004
and again between 2004 and 2005. However, the inflation rate was higher between 2004
and 2005 than it was between 2003 and 2004. Which of the following scenarios is
consistent with this assumption?
a. The CPI was 100 in 2003, 110 in 2004, and 105 in 2005.
b. The CPI was 100 in 2003, 120 in 2004, and 135 in 2005.
c. The CPI was 100 in 2003, 105 in 2004, and 130 in 2005.
d. The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.
Which of the following is correct?
a. Once adjustment is made for inflation, the prices of most natural resources have been
about steady or falling.
b. Technological progress has allowed us to substitute renewable resources for some
nonrenewable resources.
c. Technological progress has made once-crucial natural resources less necessary.
d. All of the above are correct.
A decrease in the price level
a. increases the quantity of goods and services supplied in the short run.
b. decreases the quantity of goods and services supplied in the long run.
c. decreases the quantity of goods and services demanded.
d. increases the quantity of goods and services demanded.
Figure 4-20
RefertoFigure4-20. At a price of $15,
a. quantity demanded exceeds quantity supplied.
b. there is a shortage.
c. there is an excess demand.
d. All of the above are correct.
The Fed’s policy decisions have an important influence on
a. inflation in the long run and employment and production in the short run.
b. inflation in the long run and employment and production in the long run.
c. inflation in the short run and employment and production in the short run.
d. inflation in the short run and employment and production in the long run.
In an economy where net exports are zero, if saving rises in some period, then in that
period
a. consumption and investment fall.
b. consumption falls and investment rises.
c. consumption rises and investment falls.
d. consumption rises and investment falls.
If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the
inflation rate in 2010 was 12.5%.
a. True
b. False
Suppose that demand for a good increases and, at the same time, supply of the good
decreases. What would happen in the market for the good?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
“Leaning against the wind” is exemplified by a(n)
a. tax increase when there is a recession.
b. increase in the money supply when there is a recession.
c. decrease in government expenditures when there is a recession.
d. All of the above are correct.
Figure 3-19
RefertoFigure3-19.Chile’s opportunity cost of one pound of coffee is
a. 3/4 pound of soybeans and Colombia’s opportunity cost of one pound of coffee is 1/2
pound of soybeans.
b. 3/4 pound of soybeans and Colombia’s opportunity cost of one pound of coffee is 2
pounds of soybeans.
c. 4/3 pounds of soybeans and Colombia’s opportunity cost of one pound of coffee is
1/2 pound of soybeans.
d. 4/3 pounds of soybeans and Colombia’s opportunity cost of one pound of coffee is 2
pounds of soybeans.
Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million,
retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a
price-earnings ratio of
a. 50, which is high by historical standards.
b. 50, which is low by historical standards.
c. 25, which is high by historical standards.
d. 25, which is low by historical standards.
Which of the following shifts aggregate demand to the left?
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