The law of supply says that
a. supply and income are inversely related
b. supply follows demand
c. quantity supplied equals quantity demanded
d. price and quantity supplied are inversely related
e. price and quantity supplied are directly related
Suppose that equilibrium in the dollar-pound market occurs where 300 million pounds
are demanded at a price of $1.65 per pound. If the current exchange rate is $1.80 per
pound, there is will be a(n)
a. rightward movement along the supply of British pounds curve
b. leftward movement along the supply of British pounds curve
c. rightward shift of the supply of British pounds curve
d. leftward shift of the supply of British pounds curve
e. increase in the exchange rate
Stagflation is the combination of
a. falling output and a falling price level
b. falling output and rising unemployment
c. falling output and a rising price level
d. falling output and falling unemployment
e. rising unemployment and a falling price level
What is the major cost of slowing down an ongoing inflation?
a. Output must rise above potential.
b. The Fed must sell bonds at lower prices than those at which the bonds were
purchased.
c. Output must fall below potential.
d. The Fed must purchase bonds from the public.
e. The Fed must lend additional money to member banks at below-market interest rates.
The money supply is
a. positively related to the interest rate
b. negatively related to the interest rate
c. positively related to income
d. negatively related to income
e. set by the Fed and therefore independent of the interest rate and income
The most recent economic expansion started in
a. 2005
b. 2003
c. 2005
d. 2007
e. 1998
Opportunity costs arise in production because
a. resources are unlimited
b. resources must be shifted away from producing one good in order to produce another
c. wants are limited in society
d. monetary costs of inputs usually outweigh non-monetary costs
e. the monetary costs of only a few resources are zero
In the long run,
a. fiscal policy has no effect on the labor force participation rate.
b. lower tax rates can lower the labor force participation rate.
c. less generous transfer payments can raise the labor force participation rate.
d. higher tax rates can raise the labor force participation rate.
e. None of the above.
Which of the following is not included when using the expenditure approach to
compute GDP?
a. Consumer spending on goods and services
b. Net exports
c. Government purchases
d. Private investment
e. Transfer payments
If the Fed wants to increase the interest rate, it will
a. buy bonds and increase the money supply.
b. buy bonds and decrease the money supply.
c. sell bonds and increase the money supply.
d. sell bonds and decrease the money supply.
e. sell bonds and increase money demand.
The economic model of demand
a. explains the consequences of a change in buyers’ tastes, but not the causes
b. explains the causes of a change in buyers’ tastes, but not the consequences
c. explains both the causes and consequences of a change in buyers’ tastes
d. explains neither the causes nor the consequences of a change in buyers’ tastes
e. ignores buyers’ tastes because they are too unstable to include in the model
Refer to Figure 8-1. According to the graph, the equilibrium real hourly wage and
quantity of labor employed, respectively, are
a. $10, 110 million workers
b. $8, 130 million workers
c. $8, 150 million workers
d. $6, 150 million workers
e. $6, 130 million workers
Which of the following would lead to a decrease in the money supply?
a. Banks decide to use excess reserves to purchase corporate bonds.
b. The Fed decreases the discount rate.
c. The Fed decreases the required reserve ratio.
d. The Fed sells government bonds.
e. The Fed purchases government bonds.
The three most important sources of economic growth are
a. increases in employment, protection of resources, and changes in technology
b. decreases in employment, decreases in the money supply, and improvements in
technology
c. increases in employment, increases in the capital stock, and reductions in
environmental pollution
d. increases in employment, increases in the capital stock, and improvements in
technology
e. increases in employment, decreases in the money supply, and increases in capital
stock
If the price of a foreign currency rises, we say there has been an appreciation of the
domestic currency.
How long are the terms of members of the Board of Governors in the Federal Reserve
System?
a. 2 years
b. 4 years
c. 6 years
d. 14 years
e. The remainder of the governor’s life.
If the marginal propensity to consume is 0.75 and autonomous consumption spending
will decrease by $30 billion, by how much would net taxes need to decrease in order to
have no change in output? (Ignore any timing issues.)
a. $60 billion
b. $30 billion
c. $90 billion
d. $120 billion
e. $40 billion
To eliminate built-in inflation from the economy, the Fed must
a. announce its intention to have a single policy objective
b. create a recession
c. maintain a constant rate of inflation
d. resist the temptation to change its interest rate targets
e. work closely with Congress and the President
If aggregate expenditure exceeds GDP, we expect inventories to shrink and firms to
increase production.