Your aunt gives you a PepsiCo bond with face value of $5,000. It will mature in two
years. Currently, the interest rate is 10 percent (0.10) per year. How will the value of the
bond change if the interest rate falls to 5 percent tomorrow morning?
Which of the following does the long-run Phillips curve tell us?
a. That the Fed can select any rate of unemployment it wants in the long run
b. That the Fed can select any rate of inflation and unemployment rate it wants in the
long run
c. That the Fed can select neither the rate of inflation nor the rate of unemployment in
the long run
d. That there is a tradeoff between the rate of inflation and the rate of unemployment in
the long run
e. That the Fed can select any rate of inflation it wants in the long run
Credit cards are considered to be money because they facilitate exchange.
Which of the following is an accurate description of the U.S. inflation rate since 1950?
a. The rate has always been below 4 percent.
b. Inflation was low in the 1970s.
c. Episodes of high inflation occurred in the 1970s and early 1980s.
d. Inflation rates were very high in the 1960s.
e. Episodes of high inflation occurred in the 1990s.
If the price level is falling, the economy is experiencing
a. creeping inflation
b. stagflation
c. disinflation
d. inflation
e. deflation
One way to decrease leverage is increasing capital.
When economists speak of the demand for money, they refer to the amount of money
people would like to hold
a. given that it can only be printed slowly
b. in the best of all possible worlds
c. in their bank accounts rather than their wallets
d. at each interest rate
e. rather than spend
As a result of heavy spring rains in the Midwest, the corn crop declined sharply. If corn
growers experienced an increase in sales revenue, the demand for corn must be
Other things equal, a person with a cosmetician’s certificate from a vocational school
will earn $4,000 more per year than a person without one, starting the year the
certificate is received. But after 6 years, the difference in income will disappear because
styles have changed. If the interest rate is 5 percent (0.05) per year, what is the present
value of having just received a certificate? (Assume that each year’s income is received
at the end of the year.)
Under a managed float, a country’s central bank
a. buys or sells its currency in order to keep its money supply stable
b. buys or sells its currency in order to maintain a stable exchange rate
c. may sell its currency in order to prevent a depreciation
d. may buy a foreign currency in order to prevent its appreciation
e. prints money and uses it to buy foreign currency
Microeconomics involves the analysis of smaller, less developed economies while
macroeconomics is concerned with the analysis of larger developed economies.
If net taxes decrease by $100 billion and the result is an increase in GDP of $300
billion, what is the marginal propensity to consume?
a. 0.75
b. 3.0
c. 0.66
d. 0.50
e. 0.33
Under which of the following circumstances should we be concerned about a rising
national debt?
a. When it rises at a slower pace than GDP.
b. When the government runs deficits over a long period of time, such as a decade.
c. When it rises at a faster pace than GDP.
d. When the government does not run enough surpluses to counteract prior deficits.
e. When it rises at a slower pace than the money supply.
Which of the following would lead to a leftward movement along the supply curve of
euros?
a. An increase in the U.S. interest rate relative to the European interest rate
b. An increase in the dollars per euro exchange rate
c. A decrease in Europe’s GDP
d. A decrease in the dollar price of the euros
e. A decrease in the U.S. price level relative to the European price level.
Antitrust law
Which of the following could explain an increase in labor supply to a particular labor
market?
If real GDP is increasing at a 2 percent annual rate while the unemployment rate is 7
percent, the economy is
a. not achieving full economic potential
b. experiencing an increase of 2 percent in real annual per capita GDP
c. experiencing a slump
d. experiencing high prices and low inflation
e. producing along its production possibilities frontier
Under perfect competition
Negative supply shocks confront the Fed with a dilemma because
a. full employment is no longer possible
b. the costs of fulfilling one objective are paid in terms of failure to meet the other
c. inflation cannot be prevented considering the reduced supply
d. all policy choices are equally undesirable
e. such shocks are entirely unpredictable
If the marginal propensity to consume is 0.5, the income tax rate is 10%, and income
rises by $20,000, by how much will consumption spending increase?
a. $15,000
b. $10,000
c. $5,000
d. $9,000
e. $1,000