Real GDP
a. moves in the same direction as unemployment.
b. is not adjusted for inflation.
c. measures economic activity and real income.
d. All of the above are correct.
Which of the following lists includes only changes that shift aggregate demand to the
right?
a. repeal of an investment tax credit, an increase in the money supply
b. repeal of an investment tax credit, a decrease in the money supply
c. passing of an investment tax credit, an increase in the money supply
d. passing of an investment tax credit, a decrease in the money supply
Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania.
Supposing this is the only trade that these countries do. What are the net exports of
Oceania and Escudia in that order?
a. $140 and $140
b. $100 and $40
c. $60 and -$60
d. None of the above is correct.
In the former Soviet Union, producers were paid for meeting output targets, not for
selling products. Under those circumstances, what were the economic incentives for
producers?
a. to produce good quality products so that society would benefit from the resources
used
b. to conserve on costs, so as to maintain efficiency in the economy
c. to produce enough to meet the output target, without regard for quality or cost
d. to produce those products that society desires most
Veronica deposited $1,000 into an account two years ago. The first year she earned 7
percent interest; the second year she earned 5 percent. How much money does Veronica
have in her account today?
a. $1,133.31
b. $1,120.00
c. $1,123.50
d. None of the above are correct to the nearest cent.
If the price of a Blu-Ray Disc player is three times the price of an MP3 player, then a
Blue-Ray Disc player contributes
a. more than three times as much to GDP as does a MP3 player.
b. less than three times as much to GDP as does a MP3 player.
c. exactly three times as much to GDP as does a MP3 player.
d. None of the above is necessarily correct.
Table 8-1
Refer to Table 8-1. Suppose the government is considering levying a tax in one or
more of the markets described in the table. Which of the markets will allow the
government to minimize the deadweight loss(es) from the tax?
a. market A only
b. markets A and C only
c. markets B and D only
d. market C only
A production possibilities frontier shifts outward when
a. the economy experiences economic growth.
b. the desires of the economy’s citizens change.
c. at least one of the basic principles of economics is violated.
d. opportunity costs are lessened.
Figure 19-3
Refer to this diagram to answer the questions below.
Refer to Figure 19-3. Domestic investment plus net capital outflow is represented by
the
a. demand curve in panel a.
b. demand curve in panel c.
c. supply curve in panel a.
d. None of the above is correct.
the CPI was 96 in 1982, and the CPI was 208 in 2010. How much money would you
have needed in 2010 in order to buy what you could have bought with $500 in 1982?
a. $492.35
b. $1,083.33
c. $1,124.24
d. $1,351.92
The claim that increases in the growth rate of the money supply increase nominal
interest rates but not real interest rates is known as the
a. Friedman Effect.
b. Hume Effect.
c. Fisher Effect.
d. None of the above is correct.
Figure 6-18
Refer to Figure 6-18. Sellers pay how much of the tax per unit?
a. $1.00.
b. $1.50.
c. $2.50.
d. $3.50.
For a good that is a luxury, demand
a. tends to be inelastic.
b. tends to be elastic.
c. has unit elasticity.
d. cannot be represented by a demand curve in the usual way.
Which of the following is correct?
a. The maturity of a bond refers to the amount to be paid back.
b. The principal of the bond refers to the person selling the bond.
c. A bond buyer cannot sell a bond before it matures.
d. None of the above is correct.
Suppose the government passes a law eliminating holidays and, as a result, the
production of goods and services increases because people work more days per year
(and thus enjoy less leisure per year). Based on this scenario, which of the following
statements is correct?
a. GDP would definitely increase, despite the fact that GDP includes leisure.
b. GDP would definitely increase because GDP excludes leisure.
c. GDP could either increase or decrease because GDP includes leisure.
d. GDP could either increase or decrease because GDP excludes leisure.
A country has $45 million of domestic investment and net capital outflow of -$60
million. What is its saving?
a. $15 million.
b. -$15 million.
c. $105 million.
d. -$105 million.
Which of the following games might a risk-averse person play?
a. a game where she has a 50 percent chance of winning $1 and a 50 percent chance of
losing $1
b. a game where she has a 50 percent chance of winning $100 and a 50 percent chance
of losing $100
c. a game where she has a 60 percent chance of winning $1 and a 40 percent chance of
losing $1
d. a game where she has a 40 percent chance of winning $1 and a 60 percent chance of
losing $1
Economists blame the long lines at gasoline stations in the U.S. in the 1970s on
a. U.S. government regulations pertaining to the price of gasoline.
b. the Organization of Petroleum Exporting Countries (OPEC).
c. major oil companies operating in the U.S.
d. consumers who bought gasoline frequently, even when their cars’ gasoline tanks were
nearly full.
The first three elements of a financial crisis are correctly represented as taking place in
the following order:
a. large decline in some asset prices insolvencies at financial institutions decline in
confidence in financial institutions
b. insolvencies at financial institutions decline in confidence in financial institutions
large decline in some asset prices
c. insolvencies at financial institutions economic downturn credit crunch
d. insolvencies at financial institutions credit crunch economic downturn
Suppose the MPC is 0.9. There are no crowding out or investment accelerator effects. If
the government increases its expenditures by $30 billion, then by how much does
aggregate demand shift to the right? If the government decreases taxes by $30 billion,
then by how far does aggregate demand shift to the right?
a. $283 billion and $254.7 billion
b. $283 billion and $283 billion
c. $300 billion and $270 billion
d. $300 billion and $300 billion
If the economy is initially at long-run equilibrium and aggregate demand declines, then
in the long run the price level
a. and output are higher than in the original long-run equilibrium.
b. and output are lower than in the original long-run equilibrium.
c. is lower and output is the same as the original long-run equilibrium.
d. is the same and output is lower than in the original long-run equilibrium.
The quantity demanded of a good is the amount that buyers are
a. willing to purchase.
b. willing and able to purchase.
c. willing, able, and need to purchase.
d. able to purchase.
The demand curve for a good is a line that relates
a. price and quantity demanded.
b. income and quantity demanded.
c. quantity demanded and quantity supplied.
d. price and income.
If US goods cost one dollar for each euro German goods costs, the real exchange rate
would be computed as how many German goods per U.S. goods?
a. one
b. the price of the U.S. goods
c. the amount of euros that can be bought with one U.S. dollar
d. None of the above is correct.
In a competitive market, the quantity of a product produced and the price of the product
are determined by
a. a single buyer.
b. a single seller.
c. one buyer and one seller working together.
d. all buyers and all sellers.
During the 1990s, the United Kingdom experienced low levels of inflation while
Turkey experienced high levels of inflation. A likely explanation of these facts is that
a. the United Kingdom has a better education system than Turkey.
b. the rate of growth of the quantity of money was slower in the United Kingdom than
in Turkey.
c. workers in Turkey are more productive than workers in the United Kingdom.
d. there are more instances of market power in Turkey than in the United Kingdom.
Financial intermediaries typically require mortgage borrowers to have homeowner’s
insurance and do credit checks before making the loan.
a. The insurance requirement and the credit check are both designed primarily to reduce
adverse selection.
b. The insurance requirement and the credit check are both designed primarily to reduce
the risk of moral hazard.
c. The insurance requirement is designed primarily to reduce adverse selection; the
credit check is designed primarily to reduce the risk of moral hazard.
d. The insurance requirement is designed primarily to reduce the risk of moral hazard;
the credit check is designed primarily to reduce adverse selection.
There are several criticisms of the minimum wage. Which of the following is not one of
those criticisms? The minimum wage
a. often hurts those people who it is intended to help.
b. results in an excess supply of low-skilled labor.
c. prevents some unskilled workers from getting needed on-the-job training.
d. fails to raise the wage of any employed person.
A tax on the sellers of cameras encourages
a. sellers to supply a smaller quantity at every price.
b. buyers to demand a smaller quantity at every price.
c. sellers to supply a larger quantity at every price.
d. Both a) and b) are correct.
Assume that there is no accelerator affect. The MPC = 3/4. The government increases
both expenditures and taxes by $600. The effect of taxes on aggregate demand is 3/4 the
size of that created by government expenditures alone. The crowding out effect is 1/5 as
strong as the combined effect of government expenditures and taxes on aggregate
demand. How much does aggregate demand shift by?
a. $1480
b. $480
c. $160
d. None of the above is correct.
An increase in real interest rates in the United States
a. discourages both U.S. and foreign residents from buying U.S. assets.
b. encourages both U.S. and foreign residents to buy U.S. assets.
c. encourages U.S. residents to buy U.S. assets, but discourages foreign residents from
buying U.S. assets.
d. encourages foreign residents to buy U.S. assets, but discourages U.S. residents from
buying U.S. assets.