Table 4-13
The demand schedule below pertains to sandwiches demanded per week.
RefertoTable4-13.Suppose Harry, Darby, and Jake are the only demanders of
sandwiches. Also suppose the following:
x = 2.
The current price of a sandwich is $3.00.
The market quantity supplied of sandwiches is 5.
The slope of the supply curve is 1.
Then there is currently a
a. shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00
and $5.00.
b. shortage of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.
c. surplus of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00
and $5.00.
d. surplus of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.
The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for
a. the slope of short-run aggregate supply.
b. the slope of long-run aggregate supply.
c. the slope of the aggregate-demand curve.
d. everything that makes the aggregate-demand curve shift.
To reduce the effects of crowding out caused by an increase in government
expenditures, the Federal Reserve could
a. increase the money supply by buying bonds.
b. increase the money supply by selling bonds.
c. decrease the money supply by buying bonds.
d. increase the money supply by selling bonds.
Suppose that during World War II the long-run aggregate supply curve shifted right. In
order for price and output to have changed in the direction they did, what would have to
have happened to aggregate demand?
a. It would have to have shifted left by less than aggregate supply shifted
b. It would have to have to shifted left by more than aggregate supply shifted.
c. It would have to have shifted right by less than aggregate supply shifted
d. It would have to have to shifted right by more than aggregate supply shifted.
Suppose you put $500 into a bank account today. Interest is paid annually and the
annual interest rate is 5.5 percent. The future value of the $500 is
a. $637.50 after 5 years and $822.09 after 10 years.
b. $637.50 after 5 years and $775.00 after 10 years.
c. $653.48 after 5 years and $854.07 after 10 years.
d. $688.36 after 5 years and $915.56 after 10 years.
Fiat money
a. is worthless.
b. has no intrinsic value.
c. may be used as a medium of exchange, but is not legal tender.
d. refers to highly liquid assets that do not serve as a medium of exchange.
Figure 35-6
Use the graph below to answer the following questions.
RefertoFigure35-6. The money supply growth rate is greatest at
a. A.
b. B.
c. C.
d. F.
Ralph is a plumber. Which of the following are included in his human capital?
a. the knowledge he learned on the job, and the tools he uses
b. the knowledge he learned on the job, but not the tools he uses
c. the tools he uses, but not the knowledge he learned on the job
d. neither the knowledge he learned on the job nor the tools he uses
During the early 1920s in Germany, prices
a. doubled annually.
b. doubled monthly.
c. tripled monthly.
d. tripled annually.
Over the period 1890-2010, Japan experienced a 2.65 percent average annual growth
rate of real GDP per person.
a. True
b. False
Increased optimism about the future leads to rising prices and falling unemployment in
the short run.
a. True
b. False
Two of the economy’s most important financial intermediaries are
a. suppliers of funds and demanders of funds.
b. banks and the bond market.
c. the stock market and the bond market.
d. banks and mutual funds.
Other things the same, an increase in wages above their equilibrium level
a. increases frictional unemployment but leaves the natural rate of unemployment
unchanged.
b. increases frictional unemployment and increases the natural rate of unemployment.
c. increases structural unemployment but leaves the natural rate of unemployment
unchanged.
d. increases structural unemployment and increases the natural rate of unemployment.
Another term for factors of production is
a. inputs.
b. output.
c. goods.
d. services.
Changes in the price level affect which components of aggregate demand?
a. only consumption and investment
b. only consumption and net exports
c. only investment
d. consumption, investment, and net exports
Which of the following both reduce net exports?
a. exports rise, imports rise
b. exports rise, imports fall
c. exports fall, imports rise
d. exports fall, imports fall
The U.S. income tax system is completely indexed for inflation.
a. True
b. False
When the Consumer Price Index falls from 110 to 100
a. there is inflation of 9.1% and the value of money decreases.
b. there is deflation of 9.1% and the value of money increases.
c. there is deflation of 10% and the value of money increases.
d. there is inflation of 10% and the value of money decreases.
If consumption is $4000, exports are $300, government purchases are $1000, imports
are $400, and investment is $800, then GDP is $5700.
a. True
b. False
A tax increase has
a. a multiplier effect but not a crowding out effect
b. a crowding out effect but not a multiplier effect
c. both a crowding out and multiplier effect
d. neither a multiplier or crowding out effect
If the U.S. imposed import quotas on cotton, then which of the following would rise?
a. the U.S. real exchange rate and U.S. net exports
b. the U.S. real exchange rate but not U.S. net exports
c. U.S. net exports but not the U.S. real exchange rate
d. neither the U.S. real exchange rate nor U.S. net exports
Other things the same, a decrease in the price level makes consumers feel
a. less wealthy, so the quantity of goods and services demanded falls.
b. less wealthy, so the quantity of goods and services demanded rises.
c. more wealthy, so the quantity of goods and services demanded rises.
d. more wealthy, so the quantity of goods and services demanded falls.
The sale of either stocks or bonds to raise money is known as equity finance.
a. True
b. False
Labor unions
a. raise wages in unionized industries.
b. create labor shortages in non-unionized industries.
c. play a larger role in the current U.S. economy than in European countries such as
Norway and Sweden.
d. prefer to operate in states with right-to-work laws.
If a U.S. resident purchases a foreign bond, her transactions are included
a. in the U.S. supply of loanable funds and the supply of dollars in the market for
foreign-currency exchange.
b. in the U.S. supply of loanable funds and the demand for dollars in the market for
foreign-currency exchange.
c. in the U.S. demand for loanable funds and the supply of dollars in the market for
foreign-currency exchange.
d. in the U.S. demand for loanable funds and the demand for dollars in the market for
foreign-currency exchange.
Which of the following events would unambiguously cause a decrease in the
equilibrium price of cotton shirts?
a. an increase in the price of wool shirts and a decrease in the price of raw cotton
b. a decrease in the price of wool shirts and a decrease in the price of raw cotton
c. an increase in the price of wool shirts and an increase in the price of raw cotton
d. a decrease in the price of wool shirts and an increase in the price of raw cotton
Unions contribute to
a. frictional unemployment but not the natural rate of unemployment.
b. the natural rate of unemployment but not frictional unemployment.
c. both frictional unemployment and the natural rate of unemployment.
d. neither frictional unemployment nor the natural rate of unemployment.
Treasury Bonds are
a. liquid, but not a store of value.
b. a store of value, but not liquid.
c. both liquid and a store of value.
d. neither liquid nor a store of value.
If a country changes its corporate tax laws so that foreign businesses build and manage
more business in that country, then the net capital outflow of that country
a. and the net capital outflow of other countries rise.
b. rises and the net capital outflow of other countries fall.
c. falls and the net capital outflow of other countries rise.
d. None of the above are correct.
GDP does not reflect
a. the value of leisure.
b. the value of goods and services produced at home.
c. the quality of the environment.
d. All of the above are correct.
Which of the following is correct?
a. In the national income accounts, investment and private saving refer to the same
thing.
b. In a closed economy if national saving is greater than zero, then everyone must be
saving.
c. The financial system channels funds from savers to borrowers.
d. People whose consumption exceeds their income are savers.
Forward-looking parents can reverse the adverse effects of government debt by saving
more and leaving a larger bequest to their children.
a. True
b. False
James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to
increase to 206 but it actually increased to 204. The real interest rate he paid is
a. higher than he had expected, and the real value of the loan is higher than he had
expected.
b. higher than he had expected, and the real value of the loan is lower than he had
expected.
c. lower than he had expected, and the real value of the loan is higher than he had
expected.
d. lower then he had expected, and the real value of the loan is lower than he had
expected.
An increase in the price level causes the value of money to _____. Therefore, people
will want to hold ____ money, because the cost of their purchases has increased.
Figure 28-7
RefetoFigure28-7. If the minimum wage is equal to $125, what is the quantity of labor
supplied, the quantity of labor demanded, and number unemployed?
If for some reason U.S. residents increase their purchases of foreign assets, then all else
constant which curve in the market for foreign-currency exchange shifts and which
direction does it shift? What happens to the exchange rate?
Why have labor-force participation rates for women in the United States increased since
World War II while labor- force participation rates for men have decreased?
Scenario 1-1
You have the afternoon free. You have a choice between going to the movies with a
friend or studying economics for three hours. If you go to the movies, you will spend
$8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three
hours, you will raise your exam grade by 10 points.
RefertoScenario1-1.What is your opportunity cost of going to the movies?
If the Fed responded to an adverse supply shock by increasing the growth rate of the
money supply and maintained the higher growth rate, what would eventually happen to
the short-run Phillips curve? Why?
Why might the response of far-sighted consumers reduce the multiplier effect of an
increase in government expenditures?
The Internet my reduce frictional unemployment because it.
Suppose you invest $10,000 at 7% interest to be withdrawn by your heirs in 100 years.
According to the rule of 70, approximately how much will your heirs be able to
withdraw?
Suppose a country has had a high and relatively stable inflation rate for a long time.
How might this affect the costs and benefits of inflation reduction?
Table 3-41
Refer to Table3-41. If the two countries specialize and trade with each other, which
country will import compasses?
One of the features of money is its store of value. However, most people do not hold
their wealth as currency. Given that currency is the most liquid type of asset, why don”t
people hold all their wealth as currency?
Suppose that the economy is at an inflation rate such that unemployment is above the
natural rate. How does the economy return to the natural rate of unemployment if this
lower inflation rate persists? Use sticky-wage theory to explain your answer.
Suppose people anticipate an increase in the expected price level. Which curve(s) in the
aggregate demand and aggregate supply model would be affected, and which way
would it (they) shift?
Consider the production function Y=2F(L,K,H,N). Suppose F(12,10,9,7)=100 and
F(24,20,18,14)=180. Does the production function have the property of constant returns
to scale? Why or why not?