Which of the following is included in M1 and M2?
a. traveler’s checks
b. savings deposits
c. money market mutual funds
d. small time deposits
Sheri, a U.S. citizen, builds and operates a bookstore in Spain. This action is an
example of
a. investment for Sheri and U.S. foreign direct investment.
b. investment for Sheri and U.S. foreign portfolio investment.
c. U.S. foreign direct investment and U.S. domestic investment.
d. U.S. foreign portfolio investment and U.S. domestic investment.
A demand curve shows the relationship between price and
a. income.
b. quantity demanded.
c. production.
d. income and quantity demanded.
In 2009, GDP per person in the United States was almost
a. $25,000.
b. $32,000.
c. $46,000
d. $53,000
Figure 7-23
Refer to Figure 7-23. Which of the following statements is correct?
a. The market is in equilibrium at Q1.
b. At Q2, the cost to sellers exceeds the value to buyers.
c. At Q4, the value to buyers is less than the cost to sellers.
d. At Q3, the market is producing too much output.
Figure 2-3
Refer to Figure 2-3. Unemployment could cause this economy to produce at which
point(s)?
a. J, L
b. J, L, M
c. K, N
d. M
Suppose the interest rate is 4 percent. Which of the following has the greatest present
value?
a. $100 today plus $190 one year from today
b. $150 today plus $140 one year from today
c. $200 today plus $90 one year from today
d. $250 today plus $40 one year from today
Other things the same, when the interest rate rises,
a. people would want to lend more, making the supply of loanable funds increase.
b. people would want to lend less, making the supply of loanable funds decrease.
c. people would want to lend more, making the quantity of loanable funds supplied
increase.
d. people would want to lend less, making the quantity of loanable funds supplied
decrease.
A stock’s dividend yield is the
a. dividend as a percentage of the price per share.
b. stock price as a percentage of the dividend.
c. dividend as a percentage of the retained earnings per share.
d. retained earnings per share as the percentage of the dividend.
Assume the money market is initially in equilibrium. If the price level decreases, then
according to liquidity preference theory there is an excess
a. supply of money until the interest rate increases.
b. supply of money until the interest rate decreases.
c. demand for money until the interest rate increases.
d. demand for money until the interest rate decreases.
Figure 21-2. On the left-hand graph, MS represents the supply of money and MD
represents the demand for money; on the right-hand graph, AD represents aggregate
demand. The usual quantities are measured along the axes of both graphs.
Refer to Figure 21-2. Assume the money market is always in equilibrium. Under the
assumptions of the model,
a. the quantity of goods and services demanded is higher at P2 than it is at P1.
b. the quantity of money is higher at Y1 than it is at Y2.
c. an increase in r from r1 to r2 is associated with a decrease in Y from Y1 to Y2.
d. All of the above are correct.
Figure 9-4. The domestic country is Nicaragua.
Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is
a. $625, and this is an increase in total surplus.
b. $750, and this is an increase in total surplus.
c. $625, and this is a decrease in total surplus.
d. $750, and this is a decrease in total surplus.
If the price a consumer pays for a product is equal to a consumer’s willingness to pay,
then the consumer surplus relevant to that purchase is
a. zero.
b. negative, and the consumer would not purchase the product.
c. positive, and the consumer would purchase the product.
d. There is not enough information given to answer this question.
Wheat is the main input in the production of flour. If the price of wheat decreases, then
we would expect the
a. demand for flour to increase.
b. demand for flour to decrease.
c. supply of flour to increase.
d. supply of flour to decrease.
The change in aggregate demand that results from fiscal expansion changing the
interest rate is called the
a. multiplier effect.
b. crowding-out effect.
c. accelerator effect.
d. Ricardian equivalence effect.
In a market, the marginal buyer is the buyer
a. whose willingness to pay is higher than that of all other buyers and potential buyers.
b. whose willingness to pay is lower than that of all other buyers and potential buyers.
c. who is willing to buy exactly one unit of the good.
d. who would be the first to leave the market if the price were any higher.
Which of the following is not a function of prices in a market system?
a. Prices have the crucial job of balancing supply and demand.
b. Prices send signals to buyers and sellers to help them make rational economic
decisions.
c. Prices coordinate economic activity.
d. Prices ensure an equal distribution of goods and services among consumers.
Figure 7-8
Refer to Figure 7-8. Which area represents producer surplus when the price is P1?
a. BCG
b. ACH
c. ABGD
d. DGH
Suppose expected inflation and actual inflation are both relatively high, and
unemployment is at its natural rate. If the Fed then pursues a contractionary monetary
policy, which of the following results would be expected in the short run?
a. Expected inflation would exceed actual inflation, and unemployment would exceed
its natural rate.
b. Expected inflation would exceed actual inflation, and unemployment would be below
its natural rate.
c. Actual inflation would exceed expected inflation, and unemployment would exceed
its natural rate.
d. Actual inflation would exceed expected inflation, and unemployment would be below
its natural rate.
In less than two years in the early 1920s, the cost of a German newspaper rose from
0.30 marks to 70,000,000 marks. This is a spectacular example of
a. market power caused by a change in the country’s standard of living.
b. market power caused by a single firm controlling the newspaper production.
c. inflation caused by increased productivity in the economy.
d. inflation caused by an increase in the quantity of money in the economy.
When a tax is placed on a product, the price paid by buyers
a. rises, and the price received by sellers rises.
b. rises, and the price received by sellers falls.
c. falls, and the price received by sellers rises.
d. falls, and the price received by sellers falls.
Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price
index was 177 in 2001 and 5 in 2006. Henri’s 2006 salary in 2001 dollars is
a. $35,000.00.
b. $46,666.67.
c. $61,950.00
d. $105,000.00.
When the price of used cds is $4, Daphne buys five per month. When the price is $3,
she buys nine per month. Daphne’s demand for used cds is
a. elastic, and her demand curve would be relatively flat.
b. elastic, and her demand curve would be relatively steep.
c. inelastic, and her demand curve would be relatively flat.
d. inelastic, and her demand curve would be relatively steep.
Figure 7-1
Refer to Figure 7-1. If the price of the good is $250, then consumer surplus amounts to
a. $50.
b. $100.
c. $150.
d. $200.
If the cost of medical care increases by 40 percent, then, other things the same, the CPI
is likely to increase by about
a. 0.9 percent.
b. 2.4 percent.
c. 8.0 percent.
d. 40 percent.
Table 11-1
The table below pertains to Pieway, an economy in which the typical consumer’s basket
consists of 10 bushels of peaches and 15 bushels of pecans.
Refer to Table 11-1. If 2006 is the base year, then the inflation rate in 2006 was
a. 16.7 percent.
b. 20 percent.
c. 40 percent.
d. 44.1 percent.
Other things the same, a country could move from having a trade surplus to having a
trade deficit if either
a. saving rose or domestic investment rose.
b. saving rose or domestic investment fell.
c. saving fell or domestic investment rose.
d. saving fell or domestic investment fell.
With respect to the consumer price index, which of the following serves as an example
of how the substitution bias arises? Between 2010 and 2011, the price of a pound of
peanuts
a. rises from $0.80 to $1.00 while the price of a loaf of bread rises from $2.00 to $2.50.
b. falls from $0.90 to $0.72 while the price of a loaf of bread falls from $2.00 to $1.60.
c. remains constant, as does the price of a loaf of bread.
d. None of the above serves as an example of how the substitution bias arises.
Domestic saving must equal domestic investment in
a. both closed and open economies.
b. closed, but not open economies.
c. open, but not closed economies.
d. neither closed nor open economies.
According to the quantity equation, the price level would change less than
proportionately with a rise in the money supply if there were also
a. either a rise in output or a rise in velocity.
b. either a rise in output or a fall in velocity.
c. either a fall in output or a rise in velocity.
d. either a fall in output or a fall in velocity.
In one day Madison Laundry washed 4,000 pounds of laundry with 5 workers who each
worked 8 hours. What was its productivity?
a. 4000 pounds of laundry
b. 500 pounds of laundry per hour
c. 100 pounds of laundry per hour
d. None of the above is correct.
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
In the CPI, goods and services are weighted according to
a. how long a market has existed for each good or service.
b. the extent to which each good or service is regarded by the government as a
necessity.
c. how much consumers buy of each good or service.
d. the number of firms that produce and sell each good or service.