If the price of Italian shoes imported into the United States increases, then
a. both the GDP deflator and the consumer price index will increase.
b. neither the GDP deflator nor the consumer price index will increase.
c. the GDP deflator will increase, but the consumer price index will not increase.
d. the consumer price index will increase, but the GDP deflator will not increase.
If the price of a good in the U.S. is $10 and the unit of foreign currency is the dinar, in
which case is the real exchange rate 5/4?
a. the foreign price is 4 dinars and the exchange rate is 1/2 dinars per dollar
b. the foreign price is 5 dinars and the exchange rate is 2.5 dinars per dollar
c. the foreign price is 4 dinars and the exchange rate is 2 dinars per dollar
d. the foreign price is 5 dinars and the exchange rate is 2/5 dinars per dollar
The output of goods and services produced in the United States has grown on average 3
percent per year since 1965.
a. True
b. False
Tatiana is waiting to be recalled to a job from which she was laid off. Ivan was fired but
has not looked for work during the last two months. Who does the Bureau of Labor
Statistics count as “unemployed”?
a. Tatiana but not Ivan
b. Ivan but not Tatiana
c. both Ivan and Tatiana
d. neither Ivan nor Tatiana
Table24-12.Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
RefertoTable24-12. Will’s 2009 food expenditures in 2010 dollars amount to
a. $5,500.
b. $5,250.
c. $4,975.
d. $3,625.
Most spells of unemployment are short. About half of unemployment spells end with an
exit from the labor force.
a. True
b. False
The principle of monetary neutrality implies that an increase in the money supply will
a. increase real GDP and the price level.
b. increase real GDP, but not the price level.
c. increase the price level, but not real GDP.
d. increase neither the price level nor real GDP.
Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer’s basket
consists of 15 bushels of peaches and 10 bushels of pecans.
RefertoTable24-2. The cost of the basket in 2012 was
a. $200.
b. $225.
c. $235.
d. $212.50.
Alfonso has noticed that increases in unemployment insurance claims are associated
with recessions, and therefore he advocates limits on unemployment insurance so as to
prevent recessions. Mary has noticed that most drug addicts once attended schools, and
therefore she advocates getting rid of schools so as to prevent drug addiction.
a. The reasoning of both Alfonso and Mary suffers from the omitted variable problem.
b. The reasoning of both Alfonso and Mary suffers from the reverse causality problem.
c. Alfonso’s reasoning suffers from the reverse causality problem, and Mary’s reasoning
suffers from the omitted variable problem.
d. Mary’s reasoning suffers from the reverse causality problem, and Alfonso’s reasoning
suffers from the omitted variable problem.
Yvonne takes out a fixed-interest-rate loan and then inflation turns out to be higher than
she had expected it to be. The real interest rate she pays is
a. higher than she had expected, and the real value of the loan is higher than she had
expected.
b. higher than she had expected, and the real value of the loan is lower than she had
expected.
c. lower than she had expected, and the real value of the loan is higher than she had
expected.
d. lower then she had expected, and the real value of the loan is lower than she had
expected.
If the government of a country with a zero trade balance started with a budget deficit
and moved to a budget surplus, domestic investment would
a. rise and there would be a trade surplus.
b. rise and there would be a trade deficit.
c. fall and there would be a trade surplus.
d. fall and there would be a trade deficit.
Suppose a person receives an education in her home country. Which of the following
will tend to make the increase
in GDP of the person’s home country larger than the increase in this person’s income?
a. externalities and brain drain
b. externalities but not brain drain
c. brain drain but not externalities
d. neither externalities nor brain drain
If the exchange rate falls, U.S. residents pay
a. more dollars for foreign bonds and get more dollars from interest payments.
b. more dollars for foreign bonds but get fewer dollars from interest payments.
c. fewer dollars for foreign bonds and also get fewer dollars from interest payments.
d. fewer dollars for foreign bonds but get more dollars from interest payments.
Figure 2-2
Refer to Figure2-2. If the outer loop of this circular-flow diagram represents flows of
dollars, then the inner loop includes
a. flows of goods and services from households to firms.
b. flows of inputs from households to firms.
c. flows of rent payments paid to owners of land.
d. flows of wages and salaries paid to workers.
If the supply of loanable funds shifts left, then
a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
To decrease the money supply, the Fed can
a. buy government bonds or increase the discount rate.
b. buy government bonds or decrease the discount rate.
c. sell government bonds or increase the discount rate.
d. sell government bonds or decrease the discount rate.
Aggregate demand shifts right when the government
a. decreases taxes.
b. cuts military expenditures.
c. repeals an investment tax credit.
d. None of the above is correct.
At the Federal Reserve,
a. the nation’s monetary and fiscal policies are made by the Federal Open Market
Committee, which meets about every six weeks.
b. the nation’s monetary and fiscal policies are made by the Federal Open Market
Committee, which meets twice a year.
c. the nation’s monetary policy is made by the Federal Open Market Committee, which
meets about every six weeks.
d. the nation’s monetary policy is made by the Federal Open Market Committee, which
meets twice a year.
Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the
population was 2.2 million. The year before, real GDP was 500.0 billion and the
population was 2.0 million. What was the growth rate of real GDP per person during the
year?
a. 12 percent
b. 10 percent
c. 4 percent
d. 2 percent
A trade policy is a government policy
a. directed toward the goal of improving the tradeoff between equity and efficiency.
b. that directly influences the quantity of goods and services that a country imports or
exports.
c. intended to exploit the tradeoff between inflation and unemployment by altering the
budget deficit.
d. concerning employment laws.
Which of the following would cause stagflation?
a. rising government expenditures
b. rising oil prices
c. a falling money supply
d. technical progress
The following table contains a monthly demand schedule for large, single-topping,
carry-out pizzas.
If the law of demand applies to these pizzas, then A could be
a. 0.
b. 15.
c. 25.
d. 30.
The efficiency-wage theory of worker turnover suggests that firms with higher turnover
will have
a. higher production costs and higher profits.
b. higher production costs and lower profits.
c. lower production costs and higher profits.
d. lower production costs and lower profits.
During periods of expansion, automatic stabilizers cause government expenditures
a. and taxes to fall.
b. and taxes to rise.
c. to rise and taxes to fall.
d. to fall and taxes to rise.
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.The effects of the housing and financial crises could be
shown by shifting
a. aggregate demand to the right.
b. aggregate demand to the left.
c. aggregate supply to the right.
d. aggregate supply to the left.
You could borrow $2,000 today from Bank A and repay the loan, with interest, by
paying Bank A $2,125 one year from today. Or, you could borrow Xdollars today from
Bank B and repay the loan, with interest, by paying Bank B $2,200 two years from
today. In order for the same interest rate to apply to the two loans, X=
a. $1,853.55.
b. $1,898.70.
c. $1,948.79.
d. $2,012.22.
According to the classical model, an increase in the money supply causes
a. output to increase in the long run.
b. the unemployment rate to fall in the long run.
c. prices to rise in the long run.
d. interest rates to fall in the long run.
If something happens to alter the quantity demanded at any given price, then
a. the demand curve becomes steeper.
b. the demand curve becomes flatter.
c. the demand curve shifts.
d. we move along the demand curve.
An economy recently reported nominal GDP of 3 trillion euro and a GDP deflator of
200. What was real GDP?
a. 1.5 trillion euro, and real GDP is a better gauge of economic activity than nominal
GDP.
b. 1.5 trillion euro, but nominal GDP is a better gauge of economic activity than real
GDP.
c. 6 trillion euro, and real GDP is a better gauge of economic activity than nominal
GDP.
d. 6 trillion euro, but nominal GDP is a better gauge of economic activity than real
GDP.
Assume the market for pork is perfectly competitive. When one pork buyer exits the
market,
a. the price of pork increases.
b. the price of pork decreases.
c. the price of pork does not change.
d. there is no longer a market for pork.