Carl is considering attending a concert with a ticket price of $35. He estimates that the
cost of driving to the concert and parking there will total an additional $20. In order to
attend the concert, Carl will have to take time off from his part-time job. He estimates
that he will lose 5 hours at work, at a wage of $6 per hour. Carl’s opportunity cost of
attending the concert equals
a. $35
b. $55
c. $30
d. $65
e. $85
When positive spending shocks occur, transfer payments automatically fall.
According to Thomas Malthus, the human race is doomed to suffer repeated famines
and wars because
a. population and food supply both increase arithmetically
b. population and food supply both increase geometrically
c. population increases arithmetically while food supply increases geometrically
d. population increases geometrically while food supply increases arithmetically
e. population increases exponentially while food supply increases geometrically
Reserves are defined as
a. the total cash in bank vaults
b. money deposited in Federal Reserve accounts
c. the sum of vault cash and deposits at Federal Reserve banks
d. the total amount of money a bank must hold
e. ten percent of demand deposit liabilities
The approach to calculating GDP that measures the contribution of each firm to GDP is
referred to as the
a. expenditures approach to measuring GDP
b. factor payments approach to measuring GDP
c. value added approach to measuring GDP
d. productivity approach to measuring GDP
e. output approach to measuring GDP
Refer to Figure 5-1 above. If the economy goes from point A to point C on the graph, it
is going through a(n)
a. peak
b. trough
c. expansion
d. business cycle
e. recession
Refer to Figure 16-2. Suppose a supply shock shifts aggregate supply from AS1 to AS2
and decreases output below full employment. Which of the following statements is
most accurate?
a. By increasing the money supply, the Fed can stabilize the interest rate and price level
and return output to its full-employment level.
b. By decreasing the money supply, the Fed can stabilize the interest rate and price level
and return output to its full-employment level.
c. By increasing the money supply, the Fed can stabilize the price level but output will
remain below the full-employment level.
d. By increasing the money supply, the Fed can return output to its full-employment
level but at the expense of a further increase in the price level.
e. By increasing the money supply, the Fed can stabilize the price level and return
output to its full-employment level but must sacrifice its interest rate target.
Unemployment benefits tend to be higher in Europe and are offered for longer periods
than in the United States.
If a bank receives a deposit of $3,000 and loans out $2,000, what changes will occur on
the bank’s balance sheet (after all checks involved with the loan are cleared)?
a. Reserves decrease by $3,000, total assets decrease by $1,000, and total liabilities
increase by $3,000.
b. Reserves increase by $1,000, total assets increase by $2,000, and total liabilities
increase by $3,000.
c. Reserves increase by $3,000, total assets by increase $3,000, and total liabilities
increase by $3,000.
d. Reserves increase by $3,000, total assets by increase $2,000, and total liabilities
decrease by $3,000.
e. Reserves increase by $1,000, total assets increase by $3,000, and total liabilities
increase by $3,000.
Which of the following occurs during an expansion?
a. Output rises, employment rises and unemployment falls.
b. Output falls, employment rises and unemployment falls.
c. Output rises, employment falls and unemployment falls.
d. Output rises, employment rises and unemployment rises.
e. Output rises, employment rises and tax revenues fall..
Since most firms use a stable markup, prices will remain stable over long periods of
time.
If workers become less productive, which of the following would happen in the labor
market?
a. Labor supply would decrease.
b. Labor supply would increase.
c. Labor demand would decrease and labor supply would increase.
d. Labor demand would increase and so would labor supply.
e. Labor demand would decrease.
If the Fed wanted to prevent a change in money demand from affecting real GDP, which
of the following rules would be feasible and allow the Fed to attain its goal?
a. Keep government spending constant
b. Keep the money supply constant
c. Keep money demand constant
d. Keep taxes constant
e. Keep the interest rate constant.
If British real GDP rose relative to U.S. real GDP, there would be
a. a rightward movement along the supply of British pounds curve in the dollar-pound
market
b. a leftward movement along the supply of British pounds curve in the dollar-pound
market
c. a rightward shift of the supply of British pounds curve in the dollar-pound market
d. a leftward shift of the supply of British pounds curve in the dollar-pound market
e. the tendency for the supply of British pounds curve to become flatter in the
dollar-pound market
If people come to expect ongoing inflation, what will happen over time independent of
the Fed’s response?
a. The long-run aggregate supply curve will shift to the right.
b. The aggregate supply curve will continue to shift upward.
c. The aggregate demand curve will continue to shift to the right.
d. The aggregate supply curve will continue to shift downward.
e. The aggregate demand curve will continue to shift to the left.
Assume that Kelly’s various possible activities are mutually exclusive. The opportunity
cost from choosing one activity equals the
a. summed value of all her alternative activities
b. summed value of all her alternative activities minus the value of the chosen activity
c. value of the next most valuable alternative activity
d. value of the next most valuable alternative activity minus the value of the chosen
activity
e. summed value of all her alternative activities minus the value of the next most
valuable alternative activity
Which of the following sets of goods are most likely to be complementary goods?
a. shoes and pizza
b. automobiles and computers
c. baseballs and baseball gloves
d. football tickets and baseball tickets
e. Dell and Gateway computers
Ongoing inflation means the Fed must respond to
a. an upward-shifting AS curve
b. a downward-shifting AS curve
c. changing interest rate targets
d. a depression
e. a lower real interest rate