If the reserve ratio is 20 percent, the money multiplier is
a. 2.
b. 4.
c. 5.
d. 8.
Figure 9-12
Refer to Figure 9-12. Equilibrium price and equilibrium quantity without trade are
a. $27 and 400.
b. $27 and 800.
c. $21 and 400.
d. $21 and 600.
Figure 4-13
Refer to Figure 4-13. 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.
Figure 5-4
Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds
to prices between $8 and $16. Then, when the price changes between $9 and $10,
a. quantity demanded changes proportionately less than the price.
b. quantity demanded changes proportionately more than the price.
c. quantity demanded changes the same amount proportionately as price.
d. the price elasticity of demand equals 1.
Figure 9-6
Refer to Figure 9-6. When a tariff is imposed in the market, domestic producers
a. gain by $100.
b. gain by $200.
c. gain by $300.
d. lose by $100.
The Federal Reserve
a. does not have an inflation targe; if it did it would likely be 1% or less.
b. does not have an inflation target; if it did it would likely be in the range of 2%.
c. does have an inflation target; it is 1%.
d. does have an inflation target; it is a range from 1-3%.
Many things that society values, such as good health, high-quality education, enjoyable
recreation opportunities, and desirable moral attributes of the population, are not
measured as part of GDP. It follows that
a. GDP is not a useful measure of society’s welfare.
b. GDP is still a useful measure of society’s welfare because providing these other
attributes is the responsibility of government.
c. GDP is still a useful measure of society’s welfare because it measures a nation’s
ability to purchase the inputs that can be used to help produce the things that contribute
to welfare.
d. GDP is still the best measure of society’s welfare because these other values cannot
actually be measured.
In the long run,
a. the natural rate of unemployment depends primarily on the level of aggregate
demand.
b. inflation depends primarily upon the money supply growth rate.
c. there is a tradeoff between the inflation rate and the natural rate of unemployment.
d. All of the above are correct.
Advocates of the minimum wage
a. deny that the minimum wage produces any adverse effects.
b. emphasize the benefits to teenagers of increases in the minimum wage.
c. emphasize the low annual incomes of those who work for the minimum wage.
d. All of the above are correct.
Suppose that the demand for digital cameras is elastic, and the supply of digital cameras
is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective
price received by sellers of digital cameras by
a. less than $10.
b. $10.
c. between $10 and $20.
d. $20.
Economists at the Congressional Budget Office estimated that for 2009, the U.S. natural
rate of unemployment was
a. 2.5 percent.
b. 3.0 percent.
c. 5.0 percent.
d. 6.5 percent.
If the price level increased from 120 to 126, then what was the inflation rate?
a. 3 percent
b. 5 percent
c. 6 percent
d. None of the above is correct.
During a recession the economy experiences
a. rising employment and income.
b. rising employment and falling income.
c. rising income and falling employment.
d. falling employment and income.
Table 16-6.
Bank of Springfield
Refer to Table 16-6. If the Bank of Springfield has lent out all the money it can given
its level of deposits, then what is the reserve requirement?
a. 5.00 percent
b. 8.00 percent
c. 8.42 percent
d. 95.00 percent
Which of the following is not correct?
a. The president of the New York Federal Reserve bank is the only Federal Reserve
Regional Bank President who gets to vote at every meeting of the Federal Open Market
Committee.
b. The Fed’s policy decisions influence the economy’s rate of inflation in the short run
and the economy’s employment and production in the long run.
c. The Fed’s primary monetary policy tool is open-market operations.
d. All of the above are correct.
A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It
also reported a GDP deflator of 85 in 2010 and 100 in Between 2009 and 2010,
a. real output and the price level both rose.
b. real output rose and the price level fell.
c. real output fell and the price level rose.
d. real output and the price level both fell.
Political Instability Abroad
Suppose that political instability in other countries makes people fear for the value of
their assets in these countries so that they desire to purchase more U.S assets.
Refer to Political Instability Abroad. What would happen to the dollar?
a. It would appreciate in foreign exchange markets making U.S goods more expensive
compared to foreign goods.
b. It would appreciate in foreign exchange markets making U.S. goods less expensive
compared to foreign goods.
c. It would depreciate in foreign exchange markets making U.S. goods more expensive
compared to foreign goods.
d. It would depreciate in foreign exchange markets making U.S. goods less expensive
compared to foreign goods.
Most economists use the aggregate demand and aggregate supply model primarily to
analyze
a. short-run fluctuations in the economy.
b. the effects of macroeconomic policy on the prices of individual goods.
c. the long-run effects of international trade policies.
d. productivity and economic growth.
Trade between countries
a. allows each country to consume at a point outside its production possibilities frontier.
b. limits a country’s ability to produce goods and services on its own.
c. must benefit both countries equally; otherwise, trade is not mutually beneficial.
d. can best be understood by examining the countries’ absolute advantages.
If a reduction in taxes on savings reduced the amount of private saving, then the
a. income effect equaled the substitution effect.
b. income effect outweighed the substitution effect.
c. the substitution effect outweighed the income effect.
d. None of the above.
A tax imposed on the sellers of a good will raise the
a. price paid by buyers and lower the equilibrium quantity.
b. price paid by buyers and raise the equilibrium quantity.
c. effective price received by sellers and lower the equilibrium quantity.
d. effective price received by sellers and raise the equilibrium quantity.
When a tax is imposed on a good for which both demand and supply are very elastic,
a. sellers effectively pay the majority of the tax.
b. buyers effectively pay the majority of the tax.
c. the tax burden is equally divided between buyers and sellers.
d. None of the above is correct; further information would be required to determine how
the burden of the tax is distributed between buyers and sellers.
Which movie is an allegory about late 19th century monetary policy?
a. The Wizard of Oz
b. Mary Poppins
c. It’s a Wonderful Life
d. Trading Places
Table 10-1
The table below contains data for Bahkan for the year 2010.
Refer to Table 10-1. The market value of all final goods and services produced within
Bahkan in 2010 is
a. $95.
b. $100.
c. $110.
d. $120.
A country has output of $900 billion, consumption of $600 billion, government
expenditures of $150 billion and investment of $120 billion. What is its supply of
loanable funds?
a. $30 billion
b. $90 billion
c. $120 billion
d. $150 billion
If the reserve ratio is 2.5 percent, then the money multiplier is
a. 40.
b. 25.
c. 2.5.
d. 1.25.
Figure 6-21
Refer to Figure 6-22. The effective price that sellers receive after the tax is imposed is
a. $5.
b. $6.
c. $7.
d. $8.
According to the classical dichotomy, when the money supply doubles which of the
following doubles?
a. the price level and nominal GDP
b. the price level and real GDP
c. only real GDP
d. only the price level
Unemployment insurance
a. may improve the ability of the economy to match workers with appropriate jobs.
b. reduces the job search efforts of the unemployed.
c. increases the amount of frictional unemployment in the economy.
d. All of the above are correct.
If the price elasticity of demand for a good is 0.4, then a 10 percent increase in price
results in a
a. 0.4 percent decrease in the quantity demanded.
b. 2.5 percent decrease in the quantity demanded.
c. 4 percent decrease in the quantity demanded.
d. 40 percent decrease in the quantity demanded.
Alexis and Tara both mine salt. Alexis mines 400 pounds in 40 hours. Tara mines 300
pounds in 20 hours. Which of the following is correct?
a. Alexis’s productivity is greater than Tara’s. This difference could be explained by
Alexis having more physical capital than Tara.
b. Alexis’s productivity is greater than Tara’s. This difference cannot be explained by a
difference in the physical capital each has.
c. Tara’s productivity is greater than Alexis’s. This difference could be explained by Tara
having more physical capital than Alexis.
d. Tara’s productivity is greater than Alexis’s. This difference cannot be explained by a
difference in the physical capital each has.
Which of the following events could explain an increase in interest rates together with a
decrease in investment?
a. The government budget went from surplus to deficit.
b. The government instituted an investment tax credit.
c. The government reduced the tax rate on savings.
d. None of the above is correct.
The primary purpose of measuring the overall level of prices in the economy is to
a. allow for the measurement of GDP.
b. allow consumers to know what kinds of prices to expect in the future.
c. allow for the comparison of dollar figures from different points in time.
d. allow for the comparison of dollar figures from the same point in time.