Writing in TheWallStreetJournalin 2009, economist Jeremy Siegel pointed out that the
efficient markets hypothesis
a. was responsible for the financial crisis of 2008-2009.
b. was responsible for the Great Depression of the 1930s.
c. claims that prices observed in financial markets are always “right.”
d. claims that prices observed in financial markets are mostly “wrong.”
In which of the following cases can we be certain that a natural resource has become
scarcer?
a. both the demand for the resource and the supply of the resource have increased
b. both the demand for the resource and the supply of the resource have decreased
c. demand for the resource is unchanged and the supply of the resource has increased
d. the demand for the resource has decreased and the supply of the resource is
unchanged
Fretonia and Libstien are the same except Fretonia has a larger capital stock. Both
countries undertake policies that raise their saving rates to the same higher level. We
would expect that
a. both countries would have permanent increases in their growth rates, but the increase
would initially be larger in Fretonia.
b. both countries would have permanent increases in their growth rates, but the increase
would initially be smaller in Fretonia.
c. both countries would have temporary increases in their growth rates, but the increase
would be larger in Fretonia.
d. both countries would have temporary increases in their growth rates, but the increase
would be smaller in Fretonia.
When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds
a. and U.S. net capital outflow rose.
b. and U.S. net capital outflow fell.
c. fell and U.S. net capital outflow rose.
d. rose and U.S. net capital outflow fell.
When taxes decrease, consumption
a. decreases as shown by a movement to the left along a given aggregate-demand curve.
b. decreases as shown by a shift of the aggregate demand curve to the left.
c. increases as shown by a movement to the right along a given aggregate-demand
curve.
d. increases as shown by a shift of the aggregate demand curve to the right.
In the open-economy macroeconomic model, if the supply of loanable funds shifts left
a. the interest rate rises and the supply of dollars in the market for foreign currency
exchange shifts right.
b. the interest rate rises and the supply of dollars in the market for foreign currency
exchange shifts left.
c. the interest rate falls and the demand for dollars in the market for foreign currency
exchange shifts right.
d. the interest rate falls and the demand for dollars in the market for foreign currency
exchange shifts left.
Who is included in the labor force by the Bureau of Labor Statistics?
a. Dia, an unpaid homemaker not looking for other work
b. Kevin, a full-time student not looking for work
c. Sarah, who does not have a job but is looking for work
d. None of the above is correct.
Four years ago Ollie deposited some money into an account. He earned 5 percent
interest on this account and now it has a balance of $303.88. About how much money
did Ollie deposit into his account when he opened it?
a. $210
b. $220
c. $240
d. $250
A direct or positive relationship exists between a country’s
a. productivity and its standard of living.
b. amount of government spending and its productivity.
c. total population and its average citizen’s income.
d. rate of population growth and the extent of its trade with other countries.
Figure 28-4
RefetoFigure28-4.If the government imposes a minimum wage of $2, how many
workers will be unemployed?
a. 0
b. 2,000
c. 4,000
d. 6,000
In the long run, fiscal policy influences
a. saving, investment, and growth; in the short run, fiscal policy primarily influences
technology and the production function.
b. saving, investment, and growth; in the short run, fiscal policy primarily influences
the aggregate demand for goods and services.
c. technology and the production function; in the short run, fiscal policy primarily
influences saving, investment, and growth.
d. the aggregate demand for goods and services; in the short run, fiscal policy primarily
influences technology and the production function.
According to the circular flow diagram, if Suzy is a worker who delivers flowers for
Happy Day Flower Company, she participates
a. in the markets for factors of production exchanging labor for income.
b. in the markets for factors of production exchanging flowers for revenue.
c. in the markets for goods and services exchanging flowers for wages, rent, and profit.
d. in the markets for goods and services exchanging labor for income.
If you deposit $100 of currency into a demand deposit at a bank, this action by itself
a. does not change the money supply.
b. increases the money supply.
c. decreases the money supply.
d. has an indeterminate effect on the money supply.
At a given price level, an increase in which of the following shifts aggregate demand to
the right?
a. consumption
b. investment
c. government expenditures
d. All of the above are correct.
Suppose the quality of televisions changes over time, but the quality change goes
unmeasured for the purpose of computing the consumer price index. In which of the
following instances would the bias resulting from the unmeasured quality change be
mostsevere?
a. The quality of televisions deteriorates and televisions become more expensive
relative to other goods.
b. The quality of televisions improves and televisions become less expensive relative to
other goods.
c. The quality of televisions improves and televisions become more expensive relative
to other goods.
d. The quality of televisions deteriorates and the price of televisions relative to other
prices remains unchanged.
If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by
a. $64 of new reserves.
b. $448 of new reserves.
c. $700 of new reserves.
d. $800 of new reserves.
Which of the following is an example of U.S. foreign direct investment?
a. A Swedish car manufacturer opens a plant in Tennessee.
b. A Dutch citizen buys shares of stock in a U.S. company.
c. A U.S. based restaurant chain opens new restaurants in India.
d. A U.S. citizen buys stock in companies located in Japan.
Which of the following will both make people buy more?
a. wealth and interest rates rise.
b. wealth rises and interest rates fall.
c. wealth falls and interest rates rise.
d. wealth falls and interest rates fall.
Other things the same, an increase in the U.S. real interest rate induces
a. Americans to buy more foreign assets, which increases U.S. net capital outflow.
b. Americans to buy more foreign assets, which reduces U.S. net capital outflow.
c. foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
d. foreigners to buy more U.S. assets, which increases U.S. net capital outflow.
Unpaid stayathome fathers are included in the Bureau of Labor Statistics’ “unemployed”
category.
a. True
b. False
Scenario 26-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private
saving = $225; and national saving = $150.
RefertoScenario26-3.This economy’s government is running a
a. budget deficit of $75.
b. budget deficit of $80.
c. budget deficit of $50.
d. budget deficit of $100.
Figure 4-17
RefertoFigure4-17.At a price of
a. $2, there is a surplus of 6 units.
b. $5, there is a surplus of 25 units.
c. $5, there is a shortage of $25.
d. $7, there is a surplus of 4 units.
The real interest rate is the
a. interest rate corrected for inflation.
b. interest rate as usually reported by banks.
c. difference between the interest rate charged by banks on the loans they make and the
interest rate paid by banks to their depositors.
d. difference between the average dividend yield on stocks and the average interest rate
on bonds.
If a bank posts a nominal interest rate of 4 percent, and inflation is expected to be 3
percent, then
a. the expected real interest rate is 7 percent.
b. the expected real interest rate is 1 percent.
c. the expected real interest rate is 1.33 percent.
d. the expected real interest rate is 12 percent.
A decrease in the price of large tractors imported into the United States from Russia
a. leaves the GDP deflator unchanged but decreases the consumer price index.
b. decreases the GDP deflator but leaves the consumer price index unchanged.
c. decreases both the GDP deflator and the consumer price index.
d. leaves both the GDP deflator and the consumer price index unchanged.
The inner loop of the circular-flow diagram represents the flows of inputs and outputs.
Which of the following does not appear on the inner loop?
a. wages
b. land
c. capital
d. goods and services sold
In the long run, the inflation rate depends primarily on the growth rate of the money
supply.
a. True
b. False
A country has net capital outflow of -10 billion euros and domestic investment of 20
billion euros. What is its national saving?
a. 30 billion euros
b. 10 billion euros
c. -10 billion euros
d. -30 billion euros
The sticky-wage theory of the short-run aggregate supply curve says that when the price
level rises more than expected,
a. production is more profitable and employment rises.
b. production is more profitable and employment falls.
c. production is less profitable and employment rises.
d. production is less profitable and employment falls.
Figure 2-8
RefertoFigure2-8.Point K represents an outcome in which
a. production is inefficient.
b. some of the economy’s resources are unemployed.
c. the economy is using all of its resources to produce hammers.
d. the economy is using all of its nails to produce hammers.
Table3-34
Assume that Indonesia and India can switch between producing rice and bananas at a
constant rate.
RefertoTable3-34.For which good(s) does Indonesia have a comparative advantage
a. rice and bananas.
b. rice but not bananas.
c. bananas but not rice.
d. nether rice nor bananas.
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase
in world prices of oil and foodstuffs were affecting the economy.
RefertoTheEconomyin2008.In the short run the increased prices of world
commodities
a. raised both the price level and output.
b. raised the price level and reduced output.
c. reduced the price level and raised output.
d. reduced both the price level and output.
What would happen in the market for loanable funds if the government were to
decrease the tax rate on interest income?
a. The supply of and demand for loanable funds would shift right.
b. The supply of and demand for loanable funds would shift left.
c. The supply of loanable funds would shift right and the demand for loanable funds
would shift left.
d. None of the above is correct.
If a newly elected government takes actions that makes its country’s courts more
efficient and less corrupt, then
a. producers will have greater confidence that they will benefit from their efforts.
b. producers are likely to be more specialized.
c. buyers and sellers will be more likely to honor contracts.
d. All of the above are correct.
Other things equal, the likelihood that a country will experience a relatively-high level
of income is greater if the country
a. pursues inward-oriented policies.
b. has natural seaports.
c. minimizes the role of the courts in its economy.
d. enacts policies to encourage consumption and discourage saving.