If not all prices adjust instantly to changing economic circumstances, an unexpected fall
in the price level leaves some firms with higher-than-desired prices, and these
higher-than-desired prices depress sales and induce firms to reduce the quantity of
goods and services they produce.
a. True
b. False
Disinflatiois a reduction in
a. the price level.
b. the inflation rate.
c. the consumer price index.
d. All of the above are correct.
Production possibilities frontiers cannot be used to illustrate tradeoffs.
a. True
b. False
Table 24-1
The table below lists annual consumer price index and inflation rates for a country over
the period 2005-2010. Assume the year 2005 is used as the base year.
RefertoTable24-1. What belongs in space C?
a. 120
b. 25%
c. 8.7%
d. 12%
When the money market is drawn with the value of money on the vertical axis, if the
value of money is above the equilibrium level,
a. the price level will rise.
b. the value of money will rise.
c. money demand will shift leftward.
d. money demand will shift rightward.
In communism, central planners decide which of the following?
a. what goods and services will be produced
b. how much will be produced
c. who produced and consumed the goods and services
d. All of the above are correct.
A measure of the volatility of a variable is its
a. present value.
b. future value.
c. return.
d. standard deviation.
Figure27-5. The figure shows a utility function for Dexter.
RefertoFigure27-5. From the appearance of the utility function, we know that
a. Dexter is risk averse.
b. Dexter gains less satisfaction when his wealth increases by Xdollars than he loses in
satisfaction when his wealth decreases by Xdollars.
c. the property of diminishing marginal utility does not apply to Dexter.
d. All of the above are correct.
Megan is a landscaper. Which of the following are included in her physical capital?
a. her knowledge of landscaping learned in college and her landscaping equipment
b. her knowledge of landscaping learned in college, but not her landscaping equipment
c. her landscaping equipment, but not her knowledge of landscaping learned in college
d. neither her knowledge of landscaping learned in college nor her landscaping
equipment
Wealth is redistributed from creditors to debtors when inflation was expected to be
a. high and it turns out to be high.
b. low and it turns out to be low.
c. low and it turns out to be high.
d. high and it turns out to be low.
When inflation rises people will
a. demand more money so the price level rises.
b. demand more money so the price level falls.
c. demand less money so the price level rises.
d. demand less money so the price level falls.
From 2001 to 2004, the U.S. government went from a budget surplus to a budget
deficit. According to the open- economy macroeconomic model, this should have
decreased
a. both the supply of loanable funds and the supply of dollars in the market for
foreign-currency exchange.
b. neither the supply of loanable funds nor the supply of dollars in the market for
foreign-currency exchange.
c. the supply of loanable funds but not the supply of dollars in the market for
foreign-currency exchange.
d. the supply of dollars in the market for foreign-currency exchange, but not the supply
of loanable funds.
Nominal GDP measures
a. the total quantity of final goods and services produced.
b. the dollar value of the economy’s output of final goods and services.
c. the total income received from producing final goods and services measured in
constant dollars.
d. the overall level of prices.
“Prices rise when the quantity of money rises rapidly” is an example of a
a. negative economic statement.
b. positive economic statement.
c. normative economic statement.
d. statement that contradicts one of the basic principles of economics.
An organization that tries to encourage the flow of investment to poor countries is the
a. World Bank.
b. Organization of Less Developed Countries.
c. Alliance of Developing Countries.
d. International Development Alliance.
Other things the same, a country that increases its saving rate increases
a. its future productivity and future real GDP.
b. neither its future productivity nor future real GDP.
c. its future productivity, but not its future real GDP.
d. its future real GDP, but not its future productivity.
The collapse of communism in the Soviet Union and Eastern Europe took place mainly
in the
a. 1960s.
b. 1970s.
c. 1980s.
d. 1990s.
Table 3-24
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
RefertoTable3-24. The opportunity cost of 1 unit of cheese for England is
a. 1/4 unit of bread.
b. 1 hour of labor.
c. 4 units of bread.
d. 4 hours of labor.
Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer’s
basket consists of 20 pounds of meat and 10 toys.
RefertoTable24-5.If the base year is 2006, then the CPI
a. increased from 2004 to 2005 and increased from 2005 to 2006.
b. increased from 2004 to 2005 and decreased from 2005 to 2006.
c. decreased from 2004 to 2005 and increased from 2005 to 2006.
d. decreased from 2004 to 2005 and decreased from 2005 to 2006.
The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013
and 2014. The price index in 2013 was
a. 100.0.
b. 100.7.
c. 83.3.
d. 84.6.
In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and
the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?
a. $3,485.71
b. $8,100.71
c. $18,360.66
d. $22,400.00
Which of the following is included in the demand for dollars in the market for
foreign-currency exchange in the open-economy macroeconomic model?
a. a company in Canada wants to buy oranges from the U.S
b. a Japanese banks want to buy bonds from the U.S. government
c. a U.S. citizen wants to buy stock a German company is selling
d. None of the above is correct.
You put money into an account and earn an after-tax real interest rate of 2.5 percent. If
the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent,
then what is the tax rate?
a. 28.00 percent
b. 36.25 percent
c. 43.75 percent
d. 67.50 percent
In the long run, a higher saving rate
a. cannot increase the capital stock.
b. increases the growth rate of income.
c. increases the growth rate of productivity.
d. None of the above is correct.
A problem that the Fed faces when it attempts to control the money supply is that
a. the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to
carry out its monetary policy.
b. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any
of its monetary policy tools.
c. the Fed does not have a tool that it can use to change the money supply by either a
small amount or a large amount.
d. the Fed does not control the amount of money that households choose to hold as
deposits in banks.
An increase in the interest rate could have been caused by
a. a fall in the price level causing the money-demand curve to shift leftward.
b. a fall in the price level causing the money-demand curve to shift rightward.
c. a rise in the price level causing the money-demand curve to shift leftward.
d. a rise in the price level causing the money-demand curve to shift rightward.
The nominal interest rate is 4%, the inflation rate is 1% and the tax rate is 20%. Given
U.S. tax laws, how is after- tax real return computed?
a. .03(1-.20)
b. .04(1 -.20)
c. .04(1 – .20) – .01
d. None of the above is correct.
According to liquidity preference theory, if the price level increases, then the
equilibrium interest rate
a. rises and the aggregate quantity of goods demanded rises.
b. rises and the aggregate quantity of goods demanded falls.
c. falls and the aggregate quantity of goods demanded rises.
d. falls and the aggregate quantity of goods demanded falls.
Which of the following helps to reduce frictional unemployment?
a. government-run employment agencies
b. public training programs
c. the Internet
d. All of the above are correct.
In addition to the consumer price index, the Bureau of Labor Statistics also calculates
the
a. macroeconomic price index.
b. producer price index.
c. rental unit price index.
d. terms of trade.
Suppose that over the past year, the nominal interest rate was 5 percent, the CPI was
150.3 at the end of the year, and the CPI was 144.2 at the beginning of the year. It
follows that
a. the dollar value of savings increased at 5 percent, and the purchasing power of
savings increased at 0.8 percent.
b. the dollar value of savings increased at 5 percent, and the purchasing power of
savings increased at 9.2 percent.
c. the dollar value of savings increased at 0.8 percent, and the purchasing power of
savings increased at 5 percent.
d. the dollar value of savings increased at 9.2 percent, and the purchasing power of
savings increased at 5 percent.