The slope of an upward-sloping line is positive, and the slope of a downward-sloping
line is negative.
a. True
b. False
Which of the following is correct?
a. There is consensus among economists that unions are good for the economy.
b. There is consensus among economists that unions are bad for the economy.
c. There is consensus among economists that, on net, unions have almost no impact on
macroeconomic variables.
d. There is no consensus among economists about whether unions are good or bad for
the economy.
A friend of yours asks you why market prices are better than government-determined
prices. Because you understand economic principles, you say that market-determined
prices are better because they generally reflect
a. the value of a good to society, but not the cost of making it.
b. the cost of making a good to society, but not its value.
c. both the value of a good to society and the cost of making it.
d. neither the value of a good to society nor the cost of making it.
In a fractional-reserve banking system, a bank
a. does not make loans.
b. does not accept deposits.
c. keeps only a fraction of its deposits in reserve.
d. None of the above is correct.
The ratio of government debt to GDP was higher during the Reagan presidency than at
any previous time in U.S. history.
a. True
b. False
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. If 2013 is the base year, then the CPI for 2012 was
a. 95.7.
b. 100.0.
c. 90.0.
d. 213.6.
Figure 35-6
Use the graph below to answer the following questions.
RefertoFigure35-6. Curve 1 is the
a. long-run aggregate supply curve.
b. short-run aggregate supply curve.
c. long-run Phillips curve.
d. short-run Phillips curve.
The political business cycle refers to
a. the fact that about every four years some politician advocates greater government
control of the Fed.
b. the potential for a central bank to increase the money supply and therefore real GDP
to help the incumbent get re-elected.
c. the part of the business cycle caused by the reluctance of politicians to smooth the
business cycle.
d. changes in output created by the monetary rule the Fed must follow.
The Fed sets the interest that borrowers pay on loans from
a. the discount window and the term auction facility
b. the discount window but not the term auction facility
c. the term auction facility but not the discount window
d. neither the discount window nor the term auction facility
Figure 33-11.
RefertoFigure33-11. A movement from P1and Y2, to P2and Y1would be consistent with
a. a decrease in consumption expenditures.
b. stagflation.
c. sticky-wages.
d. an increase in net exports.
If a central bank were required to target inflation at zero, then when there was an
unanticipated increase in aggregate supply the central bank
a. would have to increase the money supply. This would move unemployment closer to
the natural rate.
b. would have to increase the money supply. This would move unemployment further
from the natural rate.
c. would have to decrease the money supply. This would move unemployment closer to
the natural rate.
d. would have to decrease the money supply. This would move unemployment further
from the natural rate.
At which interest rate is the present value of $35.00 two years from today equal to
about $30.00 today?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
Dobson Construction has an investment project that would cost $150,000 today and
yield a one-time payoff of $167,000 in three years. Among the following interest rates,
which is the highest one at which Dobson would find this project profitable?
a. 5 percent
b. 4 percent
c. 3 percent
d. 2 percent
An increase in a country’s budget surplus shifts its
a. demand for loanable funds right and decreases investment spending.
b. supply of loanable funds right and increases investment spending.
c. supply of loanable funds left and decreases investment spending.
d. None of the above is correct.
Just as the aggregate-supply curve slopes upward only in the short run, the trade-off
between inflation and unemployment holds only in the short run.
a. True
b. False
If consumers view cappuccinos and latts as substitutes, what would happen to the
equilibrium price and quantity of latts if the price of cappuccinos falls?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
If the central bank decreases the money supply, then in the short run prices
a. rise and unemployment falls.
b. fall and unemployment rises.
c. and unemployment rise.
d. and unemployment fall.
Table 3-23
Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
RefertoTable3-23.The farmer should specialize in the production of
a. pork and the rancher should specialize in the production of tomatoes.
b. tomatoes and the rancher should specialize in the production of pork.
c. both goods and the rancher should specialize in the production of neither good.
d. neither good and the rancher should specialize in the production of both goods.
The large increase in oil prices in the 1970s was caused primarily by a(n)
a. increase in demand for oil.
b. decrease in demand for oil.
c. decrease in the supply of oil.
d. increase in the supply of oil.
The existence of money
a. reduces specialization.
b. makes trade easier.
c. allows for barter.
d. hinders production.
Which of the following is notcorrect?
a. Frictional unemployment results from the process of matching workers and jobs.
b. Structural unemployment results when the number of jobs is insufficient for the
number of workers.
c. Minimum wages are the predominant reason for unemployment in the U.S. economy.
d. When a minimum-wage law forces the wage to remain above the level that balances
supply and demand, it raises the quantity of labor supplied and reduces the quantity of
labor demanded compared to the equilibrium level.
RefertoFigure4-27. Panel (d) shows which of the following?
a. a decrease in demand and a decrease in quantity supplied
b. a decrease in demand and a decrease in supply
c. a decrease in quantity demanded and a decrease in quantity supplied
d. a decrease in quantity demanded and a decrease in supply
The confidence you have that a retailer will accept dollars in exchange for goods is
based primarily on money
a. being a unit of account.
b. being a medium of exchange.
c. serving as a store of value.
d. having intrinsic value.
A tax on imported goods is called a(n)
a. excise tax.
b. tariff.
c. import quota.
d. None of the above is correct.
If a tariff on beef were implemented, which of the following would rise?
a. exports and net exports
b. exports but not net exports
c. net exports but not exports
d. neither exports nor net exports
Unemployment causes production levels to be inefficient.
a. True
b. False
Estimates of the values of which of the following non-market goods or services are
included in GDP?
a. unpaid housework but not the rental value of owner-occupied homes.
b. the rental value of owner-occupied homes but not unpaid housework.
c. unpaid housework and the rental value of owner-occupied homes.
d. Neither unpaid housework nor the rental value of owner-occupied homes.
Table 3-33
Chris and Tony’s Production Opportunities
Refer toTable 3-33Chris and Tony both produce tomatoes and pasta sauce. The table
shows their possible production per month if both work the same number of 8 hour
days. If Chris and Tony both decide to specialize and produce only the good in which
they have a comparative advantage, then
a. Chris will produce only sauce and Tony will produce only tomatoes.
b. Chris will produce only tomatoes and Tony will produce only sauce.
c. Both Chris and Tony will produce only sauce.
d. Both Chris and Tony will produce only tomatoes.
Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The
local currency is the dia. Namdian banks collectively hold 100 million dias of required
reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury
Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use
only demand deposits and so the money supply consists of demand deposits.
RefetoScenario29-1.Suppose the Central Bank of Namdia purchases 25 million dias of
Namdian Treasury Bonds from banks. Suppose also that both the reserve requirement
and the percentage of deposits held as excess reserves stay the same. By how much
would the money supply of Namdia change?
a. 200 million dias
b. 150 million dias
c. 100 million dias
d. None of the above is correct.
Each of the following is a determinant of demand except
a. tastes.
b. production technology.
c. expectations.
d. the prices of related goods.