Which of the following is always correct?
a. Y – I = NCO
b. NCO = NX
c. NX = I
d. All of the above are correct.
From the standpoint of the economy as a whole, the role of
a. the interest rate is to make sure that the price of bonds increases over time.
b. diversification is to eliminate market risk.
c. insurance is to reduce the risks inherent in life.
d. insurance is to spread risks around more efficiently.
Table31-1
RefertoTable31-1.What are Bolivia’s imports?
a. $60 billion
b. $35 billion
c. $40 billion
d. None of the above are correct.
Production possibilities frontiers can be used to illustrate scarcity, trade-offs,
opportunity cost, efficiency, unemployment, technological advances, and economic
growth.
a. True
b. False
Figure35-1.The left-hand graph shows a short-run aggregate-supply (SRAS) curve and
two aggregate-demand (AD) curves. On the right-hand diagram, U represents the
unemployment rate.
RefertoFigure35-1.Assuming the price level in the previous year was 100, point F on
the right-hand graph corresponds to
a. point A on the left-hand graph.
b. point B on the left-hand graph.
c. point C on the left-hand graph.
d. point D on the left-hand graph.
Real interest rates
a. cannot be negative.
b. can be negative only if inflation is negative.
c. can be negative only if inflation is zero.
d. can be negative only if inflation is greater than zero.
In the open-economy macroeconomic model, as the exchange rate rises,
a. desired net exports fall, so the quantity of dollars supplied rise.
b. desired net exports fall, so the quantity of dollars demanded falls.
c. desired net exports rise ,so the quantity of dollars supplied falls.
d. desired net exports rise, so the quantity of dollars demanded rises.
Which of the following claims is consistent with the views of mainstream economists?
a. If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will temporarily fall.
b. If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will temporarily rise.
c. If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will permanently fall.
d. If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will permanently rise.
Demand deposits are included in
a. M1 but not M2.
b. M2 but not M1.
c. M1 and M2.
d. neither M1 nor M2.
If the central bank keeps the money supply growth rate constant, but people raise their
inflation expectations by 1 percentage point, then the short-run Phillips curve shifts
a. right and the unemployment rate rises.
b. right and the unemployment rate falls.
c. left and the unemployment rate rises.
d. left and the unemployment rate falls.
If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the
money supply by as much as
a. $6,400.
b. $8,000.
c. $12,500.
d. $10,000.
The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good
in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the
real exchange rate to the nearest 100th?
a. 3 Barbados goods per U.S. good
b. 1.33 Barbados goods per U.S. good
c. .75 Barbados goods per U.S. good
d. none of the above is correct
Suppose that Albert can buy a bond for $1,000 that matures in two years and pays
Albert $1,102.5 with certainty. He is indifferent between this bond and one that has
some risk but on which the interest rate is 3% higher. How much, to the nearest penny,
does the riskier bond pay in two years?
a. $1,160.00
b. $1,166.40
c. $1,168.65
d. $1,169.64
Sandra routinely uses currency to purchase her groceries. She is using money as a
medium of exchange.
a. True
b. False
The producer that requires a smaller quantity of inputs to produce a certain amount of a
good, relative to the quantities of inputs required by other producers to produce the
same amount of that good,
a. has a low opportunity cost of producing that good, relative to the opportunity costs of
other producers.
b. has a comparative advantage in the production of that good.
c. has an absolute advantage in the production of that good.
d. should be the only producer of that good.
When an economy is operating inside its production possibilities frontier, we know that
a. there are unused resources or inefficiencies in the economy.
b. all of the economy’s resources are fully employed.
c. economic growth would have to occur in order for the economy to move to a point on
the frontier.
d. in order to produce more of one good, the economy would have to give up some of
the other good.
Table 4-7
RefertoTable4-7.If these are the only four sellers in the market for ice cream, then the
market quantity supplied at a price of $4 is
a. 4 gallons.
b. 5 gallons.
c. 20 gallons.
d. 80 gallons.
In the open-economy macroeconomic model, if for some reason foreign citizens want to
purchase more U.S. goods and services at each exchange rate, then
a. the demand for dollars in the market for foreign-currency exchange shifts right.
b. the demand for dollars in the market for foreign-currency exchange shifts left.
c. the supply of dollars in the market for foreign-currency exchange shifts right.
d. the supply of dollars in the market for foreign-currency exchange shifts left.
When aggregate demand is too low to ensure full employment, those in favor of using
monetary and fiscal policy to stabilize the economy might recommend
a. cutting government spending.
b. raising taxes.
c. having the Fed purchase government bonds.
d. reducing the money supply.
President Barrack Obama and Congress cut taxes and raised government expenditures
during the 2008 financial crisis. According to the aggregate supply and aggregate
demand, model which of these policies would tend to reduce unemployment?
a. both the tax cut and the increase in government expenditures
b. the tax cut but not the increase in government expenditures
c. the increase in government expenditures but not the tax cut
d. neither the increase in government expenditures nor the tax cut
What happens to each of the following if investment becomes less desirable at each
interest rate?
a. the interest rate
b. net capital outflow
c. the exchange rate
Efficiency wages, minimum-wage laws, and unions all keep wages
a. below the equilibrium level, causing a shortage of labor.
b. below the equilibrium level, causing a surplus of labor.
c. above the equilibrium level, causing a shortage of labor.
d. above the equilibrium level, causing a surplus of labor.
When the Fed purchases $1000 worth of government bonds from the public, the U.S.
money supply eventually increases by
a. more than $1000.
b. exactly $1000.
c. less than $1000.
d. None of the above are correct.
If there is a political business cycle and the Federal Reserve supports the incumbent,
then we should expect that prior to elections the Fed would
a. raise interest rates to shift aggregate demand left.
b. raise interest rates to shift aggregate demand right.
c. reduce interest rates to shift aggregate demand left.
d. reduce interest rates to shift aggregate demand right.
If the cost of apparel increases by 50 percent, then, other things the same, the CPI is
likely to increase by about
a. 0.5 percent.
b. 2.0 percent.
c. 3.0 percent.
d. 11.8 percent.
The country of Solidia is politically very stable and has a long tradition of respecting
property rights. If several other countries suddenly became politically unstable, we
would expect Solidia’s
a. real interest rate to rise.
b. real exchange rate to rise.
c. net exports to rise.
d. None of the above is likely.
In the early 1920s,
a. Germany experienced a very high rate of inflation.
b. the quantity of German money was declining rapidly.
c. the value of German money remained almost constant.
d. All of the above are correct.
Figure 4-24
The diagram below pertains to the demand for turkey in the United States.
RefertoFigure4-24.All else equal, a large number of people becoming vegetarians
would cause a move from
a. DAto DB.
b. DBto DA.
c. x to y.
d. y to x.
RefertoFigure4-27. Which of the four panels illustrates an increase in quantity
demanded?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
Figure 28-3
RefetoFigure28-3.If unemployment is 2,000 workers, then the minimum wage must be
a. $4.
b. $5.
c. $7.
d. $8.
The dollar is said to appreciate 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.