An identity is an equation that
a. describes an equilibrium.
b. pertains to macroeconomics, not to microeconomics.
c. must be true because of how the variables in the equation are defined.
d. involves final goods, not intermediate goods.
According to classical macroeconomic theory,
a. the price level is sticky in the short run and it plays only a minor role in the short-run
adjustment process.
b. for any given level of output, the interest rate adjusts to balance the supply of, and
demand for, money.
c. output is determined by the supplies of capital and labor and the available production
technology.
d. All of the above are correct.
Figure 3-3
Refer to Figure3-3. If the production possibilities frontiers shown are each for one day
of production, then which of the following combinations of tacos and burritos could
Arturo and Dina together notproduce in a given day?
a. 200 tacos and 400 burritos
b. 300 tacos and 350 burritos
c. 400 tacos and 300 burritos
d. 600 tacos and 250 burritos
Michelle bought word-processing software in 2009 for $75. Michelle’s cousin, Barry,
bought an upgrade of the same software in 2010 for $75. To which problem in the
construction of the CPI is this situation most relevant?
a. substitution bias
b. unmeasured quality change
c. introduction of new goods
d. income bias
If more people think a corporation’s stock is overvalued than think it is undervalued
then there is a
a. surplus, so its price will rise.
b. surplus, so its price will fall.
c. shortage, so its price will rise.
d. shortage, so its price will fall.
Figure 3-5
Refer to Figure3-5. If Hosne and Merve both spend all of their time making wallets,
then total production is
a. 7 wallets.
b. 8 wallets.
c. 14 wallets.
d. 28 wallets.
Figure 3-18
RefertoFigure3-18. The opportunity cost of 1 cup for Juba is
a. 1/6 bowl.
b. 2/3 bowl.
c. 3/2 bowls.
d. 6 bowls.
If the government were to intervene in a market economy and fix the price of visiting a
health care provider below the market price, then we would expect, relative to the
market outcome,
a. an increase in the number of visits people want to make and an increase in the
number of visits health care providers want to provide.
b. an increase in the number of visits people want to make and a decrease in the number
of visits health care providers want to provide.
c. a decrease in the number of visits people want to make and an increase in the number
of visits health care providers want to provide.
d. a decrease in the number of visits people want to make and a decrease in the number
of visits health care providers want to provide.
A country has private saving of $500 billion, public saving of -$100 billion, domestic
investment of $150 billion, and net capital outflow of $250 billion. What is its supply of
loanable funds?
a. $650 billion
b. $600 billion
c. $400 billion
d. $350 billion
When a country’s government budget deficit decreases,
a. the real exchange rate of its currency and its net exports increase.
b. the real exchange rate of its currency and its net exports decrease.
c. the real exchange rate of its currency increases and its net exports decrease.
d. the real exchange rate of its currency decreases and its net exports increase.
The dollar is said to depreciate against the euro if
a. the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S.
goods.
b. the exchange rate falls. Other things the same, it will cost more euros to buy U.S.
goods.
c. the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S.
goods.
d. the exchange rate rises. Other things the same, it will cost more euros to buy U.S.
goods.
The theory of efficiency wages explains why
a. setting wages at the equilibrium level may increase unemployment.
b. it may be in the best interest of firms to offer wages that are above the equilibrium
level.
c. the most efficient way to pay workers is to pay them according to their skills.
d. it is efficient for firms to set wages at the equilibrium level.
The consequences of the Volcker disinflation demonstrated that when Volcker
announced his intention to reduce inflation quickly, on average the public thought
a. he would try to fool them by raising inflation to decrease unemployment.
b. inflation would be unchanged.
c. inflation would fall but not by as much or as quickly as Volcker claimed.
d. inflation would fall even further than Volcker was willing to admit.
Figure 28-4
RefetoFigure28-4.If the government imposes a minimum wage of $4, how many
workers will be unemployed?
a. 0
b. 2,000
c. 4,000
d. 6,000
Figure 4-16
RefertoFigure4-16. The shift from S” to S in the market for chocolate cake could be
caused by a(n)
a. decrease in the number of commercial bakers.
b. improvement in oven technology.
c. decrease in the price of butter.
d. decrease in the price of chocolate cake.
Grapes are considered intermediate goods
a. whether the purchaser uses them to make wine to sell or eats them.
b. if the purchaser uses them to make wine to sell others but not if the purchaser eats
them.
c. if the purchaser eats them, but not if the purchaser uses to them to make wine to sell.
d. None of the above is correct.
A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal
exchange rate is 6.5 yuan per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the cell phone cheaper?
An increase in the minimum wage
a. increases both the quantity demanded and the quantity supplied of labor.
b. decreases both the quantity demanded and the quantity supplied of labor.
c. increases the quantity of labor demanded but decreases the quantity of labor supplied.
d. decreases the quantity of labor demanded but increases the quantity of labor supplied.
Refer to Figure3-4. If Lisa and Bryce both spend all of their time producing jackets,
then total production is
a. 2 jackets.
b. 6 jackets.
c. 24 jackets.
d. 26 jackets.
In the open-economy macroeconomic model, at the equilibrium real interest rate, the
amount that people (including government) want to save exactly balances desired
domestic investment.
a. True
b. False
If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount
of goods and services as
a. $25.00 purchased in 1975.
b. $33.33 purchased in 1975.
c. $40.00 purchased in 1975.
d. $135.55 purchased in 1975.
In the simple circular-flow diagram,
a. households own the factors of production.
b. households buy all the goods and services that firms produce.
c. land, labor, and capital flow from households to firms.
d. All of the above are correct.
Which of the following statements is correct?
a. In an economy-wide sense, property rights are an important prerequisite for the price
system to work.
b. Property rights give people the ability to exercise authority over the resources they
own.
c. Based on the available evidence, the existence of well-established and well-enforced
property rights appears to be associated with an enhanced standard of living.
d. All of the above are correct.
Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought
the house they had been renting directly from the owner for $250,000. They believe
they could rent it for $12,000 this year, but stay in the house. How much does Tom and
Lilly’s decision to buy the house change GDP?
a. it reduces GDP by $12,000
b. it does not change GDP
c. it raises GDP by $238,000
d. it raises GDP by $250,000
When a supply curve or a demand curve shifts, the equilibrium price and equilibrium
quantity change.
a. True
b. False
Table 3-40
RefertoTable3-40.Italy should specialize in the production of
a. boats and import cars.
b. cars and import boats.
c. both goods and import neither good.
d. neither good and import both goods.
An example of an externality is the impact of
a. bad weather on the income of farmers.
b. the personal income tax on a person’s ability to purchase goods and services.
c. pollution from a factory on the health of people in the vicinity of the factory.
d. increases in health care costs on the health of individuals in society.
President Bigego is running for re-election against Senator Pander. Bigego proclaims
that more people are working now than when he took office. Pander says that the
unemployment rate is higher now than when Bigego took office. You conclude that
a. one of them must be lying.
b. both of them could be telling the truth if the labor force, and employment grew at the
exact same rate.
c. both of them could be telling the truth if the labor force grew slower than
employment.
d. both of them could be telling the truth if the labor force grew faster than
employment.
Samuelson and Solow believed that the Phillips curve
a. implied that low unemployment was associated with low inflation.
b. indicated that the aggregate supply and aggregate demand model was incorrect.
c. offered policymakers a menu of possible economic outcomes from which to choose.
d. All of the above are correct.
Supply refers to the position of the supply curve, whereas the quantity supplied refers to
the amount suppliers wish to sell.
a. True
b. False
If the MPC is 3/5 then the multiplier is
a. 4, so a $100 increase in government spending increases aggregate demand by $400.
b. 1.5, so a $100 increase in government spending increases output by $150.
c. 2.5, so a $100 increase in government spending increases aggregate demand by $250.
d. 1.67, so a $100 increase in government spending increases output by $166.67.
RefertoFigure35-7. Starting from C and 3, in the short run, an unexpected decrease in
money supply growth moves the economy to
a. A and 1.
b. B and 2.
c. back to C and 3.
d. D and 4.
Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer’s
basket consists of 20 pounds of meat and 10 toys.
RefertoTable24-5.The cost of the basket in 2006 was
a. $9.
b. $130.
c. $140.
d. $270.
If the nominal interest rate is 4 percent and expected inflation is 2.5 percent, then what
is the expected real interest rate?
a. 1.6 percent
b. 10 percent
c. 6.5 percent
d. 1.5 percent