To increase the money supply, the Fed could
a. sell government bonds.
b. increase the discount rate.
c. decrease the reserve requirement.
d. None of the above is correct.
In the open-economy macroeconomic model, which of the following increases net
capital outflow?
a. a fall in the real exchange rate, but not a fall in the real interest rate
b. a fall in the real interest rate, but not a fall in the real exchange rate
c. both a fall in the real exchange rate and a fall in the real interest rate
d. neither a fall in the real exchange rate nor a fall in the real interest rate
If you were told that someone you knew nothing else about had just become
unemployed, your best guess would be
a. that they would be unemployed for a long time, and that most of the unemployed
they”ve joined have been unemployed for a long time.
b. that they would be unemployed for a long time, even though most of the unemployed
they”ve joined have been unemployed for a short time.
c. that they would be unemployed for a short time, even though most of the unemployed
they”ve joined have been unemployed for a long time.
d. that they will be unemployed for a short time, and that most of the unemployed
they”ve joined have been unemployed for a short time.
If the rent for apartments in New York City were fixed below the current price, then we
would expect
a. an increase in the number of people wanting to rent apartments in New York City.
b. a decrease in the number of people wanting to rent apartments in New York City.
c. an increase in the number of apartments available for rent in New York City.
d. None of the above is correct.
A relatively steep demand curve indicates that
a. quantity demanded will adjust only slightly to a price change.
b. quantity demanded will adjust significantly to a price change.
c. quantity demanded will not adjust to a price change.
d. the change in quantity demanded will exactly equal a change in price.
A demand schedule is a table that shows the relationship between
a. quantity demanded and quantity supplied.
b. income and quantity demanded.
c. price and quantity demanded.
d. price and income.
A city wants to raise revenues to build a new municipal swimming pool next year. The
mayor suggests that the city raise the price of admission to the current municipal pools
this year to raise revenues. The city manager suggests that the city lower the price of
admission to raise revenues. Who is correct?
a. Both the mayor and city manager would be correct if demand were price elastic.
b. Both the mayor and city manager would be correct if demand were price inelastic.
c. The mayor would be correct if demand were price elastic; the city manager would be
correct if demand were price inelastic.
d. The mayor would be correct if demand were price inelastic; the city manager would
be correct if demand were price elastic.
Which of the following statements is not correct?
a. An invisible hand leads buyers and sellers to an equilibrium that maximizes total
surplus.
b. Market power can cause markets to be inefficient.
c. Externalities can cause markets to be inefficient.
d. The invisible hand can remedy most if not all types of market failures.
When two variables have a positive correlation,
a. they tend to move in opposite directions.
b. they tend to move in the same direction.
c. one variable will move while the other remains constant.
d. the variables’ values are never negative.
When a country allows trade and becomes an exporter of a good,
a. the gains of the domestic producers of the good exceed the losses of the domestic
consumers of the good.
b. the gains of the domestic consumers of the good exceed the losses of the domestic
producers of the good.
c. the losses of the domestic producers of the good exceed the gains of the domestic
consumers of the good.
d. the losses of the domestic consumers of the good exceed the gains of the domestic
producers of the good.
If the price of visiting a doctor were fixed below the current price, then we would
expect
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.
Suppose that over the past year, the real interest rate was 6 percent and the inflation rate
was -2 percent. It follows that
a. the dollar value of savings increased at 4 percent, and the purchasing power of
savings increased at 6 percent.
b. the dollar value of savings increased at 4 percent, and the purchasing power of
savings increased at 8 percent.
c. the dollar value of savings increased at 8 percent, and the purchasing power of
savings increased at 4 percent.
d. the dollar value of savings increased at 8 percent, and the purchasing power of
savings increased at 6 percent.
Two alternative measures of the overall level of prices are
a. the inflation rate and the consumer price index.
b. the inflation rate and the GDP deflator.
c. the GDP deflator and the consumer price index.
d. the cost of living index and nominal GDP.
Figure 9-1
The figure illustrates the market for wool in Scotland.
Refer to Figure 9-1. In the absence of trade, the equilibrium price of wool in Scotland
is
a. $15.
b. $45.
c. $55.
d. $70.
Figure 4-20
The graph below pertains to the supply of paper to colleges and universities.
Refer to Figure 4-20. All else equal, buyers expecting paper to be more expensive in
the future would cause a current move from
a. x to y.
b. y to x.
c. SA to SB.
d. SB to SA.
The measure of the money stock called M1 includes
a. wealth held by people in their checking accounts.
b. wealth held by people in their savings accounts.
c. wealth held by people in money market mutual funds.
d. everything that is included in M2 plus some additional items.
If the demand for loanable funds shifts left, then
a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
If the U.S. government imposes an import quota on French wine, U.S. net exports will
a. increase, the real exchange rate of the dollar will appreciate, and domestic sales of
U.S. wine will increase.
b. not change, the real exchange rate of the dollar will appreciate, and domestic sales of
U.S. wine will increase.
c. not change, the dollar will depreciate, and domestic sales of U.S. wine will not
change.
d. None of the above is correct.
John says that the future value of $250 saved for one year at 6 percent interest is less
than the future value of $250 saved for two years at 3 percent interest. George says that
the present value of a $250 payment to be received in one year when the interest rate is
6 percent is less than the value of a $250 payment to be received in two years when the
interest rate is 3 percent.
a. John and George are both correct.
b. John and George are both incorrect.
c. Only John is correct.
d. Only George is correct.
Suppose the MPC is 0.60. Assume there are no crowding out or investment accelerator
effects. If the government increases expenditures by $200 billion, then by how much
does aggregate demand shift to the right? If the government decreases taxes by $200
billion, then by how much does aggregate demand shift to the right?
a. $300 billion and $180 billion
b. $300 billion and $300 billion
c. $500 billion and $300 billion
d. $500 billion and $500 billion
In the economy of Ukzten in 2010, exports were $500, GDP was $6400, government
purchases were $1500, imports were $600, and investment was $2000. What was
Ukzten’s consumption in 2010?
a. $1800
b. $2800
c. $3000
d. $4000
In the long run, an increase in the money supply
a. leaves prices and unemployment unchanged.
b. raises prices and unemployment.
c. raises prices and leaves unemployment unchanged.
d. leaves prices unchanged and reduces unemployment.
When a relevant variable that is not named on either axis changes,
a. there will be a movement along the curve.
b. the curve will rotate clockwise.
c. the curve will be unaffected since only the variables on the axis affect the curve.
d. the curve will shift.
When a species of fish dies off due to pollution in a river where it once lived, this is an
example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. There is no market failure in this case.
Table 7-10
Refer to Table 7-10. You want to hire a professional photographer to take pictures of
your family. The table shows the costs of the four potential sellers in the local
photography market. You hire Kevin for a price of $500. What is his producer surplus?
a. $500
b. $150
c. $100
d. $50
Figure 6-1
Panel (a) Panel (b)
Refer to Figure 6-1. In which panel(s) of the figure would there be a shortage of the
good at the price ceiling?
a. panel (a) only
b. panel (b) only
c. both panel (a) and panel (b)
d. neither panel (a) nor panel (b)
The Volcker disinflation
a. had virtually no impact on output, just as the classical dichotomy suggested.
b. was associated with rising output, perhaps due to expansionary fiscal policy.
c. caused output to fall, but by less than the typical estimate of the sacrifice ratio
suggested.
d. None of the above is correct.
If the number of buyers in a market decreases, then
a. demand will increase.
b. demand will decrease.
c. supply will increase.
d. supply will decrease.
Mixster Concrete Company is considering buying a new cement truck. The owners and
their accountants decide that this is the profitable thing to do. Before they can buy the
truck, the interest rate and price of trucks change. In which case do these changes both
make them less likely to buy the truck?
a. Interest rates rise and truck prices rise.
b. Interest rates fall and truck prices rise.
c. Interest rates rise and truck prices fall.
d. Interest rates fall and truck prices fall.
Figure 5-4
Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds
to prices between $6 and $12. Then, when the price increases from $8 to $10,
a. the percent decrease in the quantity demanded exceeds the percent increase in the
price.
b. the percent increase in the price exceeds the percent decrease in the quantity
demanded.
c. sellers’ total revenue increases as a result.
d. it is possible that the quantity demanded fell from 550 to 500 as a result.
Consider three different closed economies with the following national income statistics.
Country A has taxes of $40 billion, transfers of $20 billion, and government
expenditures on goods and services of $30 billion. County B has private savings of $60
billion, and investment expenditures of $50 billion. Country C has GDP of $300 billion,
investment of $70, consumption of $180 billion, taxes of $60 billion and transfers of
$20 billion. From this information we know that there is a $10 billion government
budget deficit for
a. only country A.
b. only country B.
c. only country C.
d. all three countries.
Table 6-3
The following table contains the demand schedule and supply schedule for a market for
a particular good. Suppose sellers of the good successfully lobby Congress to impose a
price floor $2 above the equilibrium price in this market.
Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium
price, irate buyers convince Congress to repeal the price floor and to impose a price
ceiling $1 below the former price floor. The resulting market price is
a. $2.
b. $3.
c. $4.
d. $5.