In the ordered pair (5, 3), 3 is the
a. horizontal location of the point.
b. the slope.
c. the x-coordinate.
d. the y-coordinate.
Which of the following is nota reason the aggregate-demand curve slopes downward?
As the price level increases,
a. firms may believe the relative price of their output has risen.
b. real wealth declines.
c. the interest rate increases.
d. the exchange rate increases.
Compared to short-term bonds, other things the same, long-term bonds generally have
a. more risk and so they pay higher interest rates.
b. less risk and so they pay lower interest rates.
c. less risk and so they pay higher interest rates.
d. about the same risk and so they pay about the same interest rate.
For many years country A has had a lower unemployment rate than country B.
According to the long-run Phillips curve which of the following could explain this?
Country A has
a. maintained a higher money supply growth rate.
b. maintained a lower money supply growth rate.
c. a higher minimum wage than country B.
d. a lower minimum wage than country B.
If the government were to intervene and set the price of a dozen eggs above the market
price, then we would expect, relative to the market outcome,
a. an increase in the number of eggs people want to buy and an increase in the number
of eggs farmers want to sell.
b. an increase in the number of eggs people want to buy and a decrease in the number of
eggs farmers want to sell.
c. a decrease in the number of eggs people want to buy and an increase in the number of
eggs farmers want to sell.
d. a decrease in the number of eggs people want to buy and a decrease in the number of
eggs farmers want to sell.
In 2010, Acme Foods produced 300,000 bags of pretzels, employing 12,000 hours of
labor. In 2011, it produced 322,000 bags of pretzels, employing 14,000 hours of labor.
Acme Foods productivity
a. decreased by 8%.
b. was unchanged.
c. increased by 6.8%.
d. increased by 7.3%.
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
The only way to rationalize an upward slope for the short-run aggregate-supply curve is
to argue that wages are sticky in the short run.
a. True
b. False
In the long run, a decrease in the money supply growth rate
a. increases inflation and shifts the short-run Phillips curve right.
b. increases inflation and shifts the short-run Phillips curve left.
c. decreases inflation and shifts the short-run Philips curve right.
d. decreases inflation and shifts the short-run Phillips curve left.
If you believe the stock market is informationally efficient, then it is a waste of time to
engage in fundamental analysis.
a. True
b. False
When aggregate demand shifts right along the short-run aggregate supply curve,
unemployment
a. falls, so there are upward pressures on wages and prices.
b. falls, so there are downward pressures on wages and prices.
c. rises, so there are upward pressures on wages and prices.
d. rises, so there are downward pressures on wages and prices.
Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5
empty rooms for tonight. If the marginal cost of operating one room for one night is $30
and a customer is willing to pay $60 for the night, the hotel manager should
a. rent the room because the marginal benefit exceeds the marginal cost.
b. rent the room because the marginal benefit exceeds the average cost.
c. not rent the room because the marginal benefit is less than the marginal cost.
d. not rent the room because the marginal benefit is less than the average cost.
Of means tested programs and IRA’s, which lower the rate of return on saving?
a. Both means-tested programs and IRA’s.
b. Means-tested programs, but not IRA’s.
c. IRA’s but not means-tested programs.
d. Neither means-tested program, or IRA’s.
David increases the number of companies in which he holds stocks.
a. This reduces risk’s standard deviation and firm-specific risk.
b. This reduces risk’s standard deviation and market risk.
c. This raises market risk, but lowers firm-specific risk. What happens to overall risk is
unclear.
d. This raises firm-specific risk, but lowers market risk. What happens to overall risk is
unclear.
The investment component of GDP refers to financial investment in stocks and bonds.
a. True
b. False
Production is efficient if the economy is producing at a point
a. on the production possibilities frontier.
b. outside the production possibilities frontier.
c. on or inside the production possibilities frontier.
d. inside the production possibilities frontier.
The Stock Market Boom of 2015
Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise
more than expected and stay high for some time.
RefertoStockMarketBoom2015.In the long run, the change in price expectations
created by the stock market boom shifts
a. long-run aggregate supply right.
b. long-run aggregate supply left.
c. short-run aggregate supply right.
d. short-run aggregate supply left.
If changing consumer preferences increase the demand for satellite radios and decrease
the demand for video cassette recorders, the economy will likely exhibit
a. an increase in the natural rate of unemployment.
b. a decrease in the natural rate of unemployment.
c. frictional unemployment.
d. efficiency wages.
When the government prevents prices from adjusting naturally to supply and demand,
a. it equates the amount buyers want to buy with the amount sellers want to sell.
b. it adversely affects the allocation of resources.
c. it improves equality and efficiency.
d. it improves efficiency but reduces equality.
A favorable supply shock will cause inflation to
a. rise and shift the short-run Phillips curve right.
b. rise and shift the short-run Phillips curve left.
c. fall and shift the short-run Phillips curve right.
d. fall and shift the short-run Phillips curve left.
Liquidityrefers to
a. the relation between the price and interest rate of an asset.
b. the risk of an asset relative to its selling price.
c. the ease with which an asset is converted into a medium of exchange.
d. the sensitivity of investment spending to changes in the interest rate.
Figure 4-25
The graph below pertains to the supply of paper to colleges and universities.
RefertoFigure4-25.All else equal, an increase in the use of laptop computers for
note-taking would cause a move from
a. x to y.
b. y to x.
c. SAto SB.
d. SBto SA.
Identify each of the following topics as being part of microeconomics or
macroeconomics:
a. the impact of a change in consumer income on the purchase of luxury automobiles
b. the effect of a change in the price of Coke on the purchase of Pepsi
c. the impact of a war in the Middle East on the rate of inflation in the United States
d. factors influencing the rate of economic growth
e. factors influencing the demand for tractors
f. the impact of tax policy on national saving
g. the effect of pollution taxes on the U.S. copper industry
h. the degree of competition in the cable television industry
i. the effect of a balanced-budget amendment on economic stability
j. the impact of deregulation on the savings and loan industry
Production possibilities frontiers are usually bowed outward. This is because
a. the more resources a society uses to produce one good, the fewer resources it has
available to produce another good.
b. the opportunity cost of producing a good decreases as more and more of that good is
produced.
c. of the effects of technological change.
d. resources are specialized; that is, some are better at producing particular goods rather
than other goods.
Which of the following sequences best explains the negative slope of the
aggregate-demand curve?
a. price level ↑ demand for money ↓ equilibrium interest rate ↑ quantity of ⇒ ⇒ ⇒
goods and services demanded ↓
b. price level ↑ demand for money ↑ equilibrium interest rate ↓ quantity of ⇒ ⇒ ⇒
goods and services demanded ↓
c. price level ↓ demand for money ↓ equilibrium interest rate ↓ quantity of ⇒ ⇒ ⇒
goods and services demanded ↑
d. price level ↓ equilibrium interest rate ↓ demand for money ↑ quantity of ⇒ ⇒ ⇒
goods and services demanded ↑
The U.S. government increases its budget deficit, but at the same time Congress
eliminates an investment tax credit. Which of the following is correct?
a. The interest rate will increase; investment may increase or decrease.
b. The interest rate will decrease; investment may increase or decrease.
c. The interest rate may increase or decrease; investment will decrease.
d. The interest rate may increase or decrease; investment will increase.
When looking at a graph of nominal and real interest rates you notice that nominal rates
always lie above real rates. From this you conclude
a. there were serious episodes of deflation in the time frame represented on the graph.
b. consumer prices were always rising in the time frame represented on the graph.
c. the economy never experienced a recession in the time frame represented on the
graph.
d. GDP was always increasing for the time frame represented on the graph.
Scenario 26-2. Assume the following information for an imaginary, closed economy.
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion;
and taxes = $0.9 trillion.
RefertoScenario26-2.For this economy, public saving is equal to
a. $0.2 trillion and the government is running a budget surplus of $0.2 trillion.
b. $0.2 trillion and the government is running a budget deficit of $0.2 trillion.
c. -$0.2 trillion and the government is running a budget deficit of $0.2 trillion.
d. -$0.2 trillion and the government is running a budget surplus of $0.2 trillion.
Table 3-27
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
RefertoTable3-27. The opportunity cost of 1 plate for Min is
a. 1/3 parasol.
b. 1/2 parasol.
c. 2 parasols.
d. 3 parasols.
Which of the following is not correct?
a. The producer who requires a smaller quantity of inputs to produce a good is said to
have an absolute advantage in producing that good.
b. The producer who gives up less of other goods to produce Good X has the smaller
opportunity cost of producing Good X.
c. The producer who has the smaller opportunity cost of producing a good is said to
have a comparative advantage in producing that good.
d. The gains from specialization and trade are based not on comparative advantage but
on absolute advantage.
The long-run aggregate supply curve shows that by itself a permanent change in
aggregate demand would lead to a long-run change
a. in the price level and output.
b. in the price level, but not output.
c. in output, but not the price level.
d. in neither the price level nor output.
Economists speaking like scientists make
a. positive statements.
b. prescriptive statements.
c. claims about how the world should be.
d. More than one of the above is correct.
As recessions begin, income
a. and unemployment both rise.
b. rises and unemployment falls.
c. falls and unemployment rises.
d. and unemployment both fall.
If unexpected news raised people’s expectations of a corporation’s future dividends and
price, then before the price changes this corporation’s stock would be
a. overvalued, so its price would rise.
b. overvalued, so its price would fall.
c. undervalued, so its price would rise.
d. undervalued, so its price would fall.