If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the
following is correct?
a. The U.S. has a trade surplus of $350 billion.
b. The U.S. has a trade surplus of $50 billion.
c. The U.S. has a trade deficit of $350 billion.
d. The U.S. has a trade deficit of $50 billion.
Figure 17-2. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
Refer to Figure 17-2. If the relevant money-demand curve is the one labeled MD1,
then
a. when the money market is in equilibrium, one dollar purchases one-half of a basket
of goods and services.
b. when the money market is in equilibrium, one unit of goods and services sells for 2
dollars.
c. there is an excess demand for money if the value of money in terms of goods and
services is 0.375.
d. All of the above are correct.
The government of a country, which has adopted American GDP accounting
conventions, reported that seasonally adjusted GDP in quarter 3 was $12 billion at an
annual rate. This means that the seasonally-adjusted market value of all final goods and
services produced within this country in quarter 3 was
a. $3 billion.
b. $4 billion.
c. $12 billion.
d. $48 billion.
The aggregate demand and aggregate supply model implies monetary neutrality
a. only in the short run.
b. only in the long run.
c. in both the short run and the long run.
d. in neither the short run nor long run.
Which of the following models imply that a decrease in the money supply reduces
unemployment temporarily but not permanently?
a. both the long-run Phillips curve and the aggregate supply and aggregate demand
model.
b. the aggregate demand and aggregate supply model, but not the long-run Phillips
curve.
c. the long-run Phillips curve, but not the aggregate demand and aggregate supply
model.
d. neither the long-run Phillips curve nor the aggregate supply and aggregate demand
model.
Matilda just graduated from college. In order to devote all her efforts to college, she
didn’t hold a job. She is going to tour around the country on her motorcycle for a month
before she starts looking for work. Other things the same, the unemployment rate
a. increases and the labor-force participation rate decreases.
b. and the labor-force participation rate both increase.
c. increases and the labor-force participation rate is unaffected.
d. and the labor-force participation rate are both unaffected.
Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central
bank, the Bank of Highland, with the hopes of reducing the inflation rate.
Refer to Monetary Policy in Highland. The Bank of Highland reduced inflation to its
announced goal of 5%. However the unemployment rate was on average higher for
many years after. A newspaper editorial argues that the unemployment rate had moved
to this higher natural rate because (1) by itself the decrease in inflation had permanently
increased unemployment and (2) that at the same time the central bank was fighting
inflation the government of Highland had made a large increase in the minimum wage.
Which of these arguments is consistent with the Phillip’s curve model?
a. both explanations 1 and 2
b. neither explanation 1 nor 2
c. explanation 1 but not explanation 2
d. explanation 2 but not explanation 1
The diagram below represents the market for loanable funds and the market for
foreign-currency exchange in Mexico. Use the diagram to answer the following
questions.
Figure 19-7
Refer to Figure 19-7. Suppose the Mexican economy starts at r0 and E1. Which of the
following new equilibrium is consistent with capital flight?
a. ro and E0
b. r1 and E0
c. r1 and E1
d. None of the above is correct.
Figure 3-9
Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production
Possibilities Frontier
Refer to Figure 3-9. If the production possibilities frontiers shown are each for two
days of production, then which of the following combinations of bolts and nails could
Uzbekistan and Azerbaijan together make in a given 2-day production period?
a. 12 bolts and 120 nails
b. 24 bolts and 96 nails
c. 38 bolts and 50 nails
d. 44 bolts and 24 nails
A price floor is
a. a legal minimum on the price at which a good can be sold.
b. often imposed when sellers of a good are successful in their attempts to convince the
government that the market outcome is unfair without a price floor.
c. a source of inefficiency in a market.
d. All of the above are correct.
Which of the following would most likely serve as an example of a monopoly?
a. a bakery in a large city
b. a bank in a large city
c. a local cable television company
d. a small group of corn farmers
Figure 7-20
Refer to Figure 7-20. At equilibrium, producer surplus is
a. $36.
b. $72.
c. $108.
d. $144.
Compared to short-term bonds, other things the same, long-term bonds generally have
a. more risk and so they pay higher interest rates.
b. less risk and so they pay lower interest rates.
c. less risk and so they pay higher interest rates.
d. about the same risk and so they pay about the same interest rate.
Iggie took a university teaching job as an assistant professor in 1974 at a salary of
$10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If
the price index was 50 in 1974 and 180 in 2003, then what is Iggie’s 2003 salary in
1974 dollars?
a. $13,888.89
b. $40,000
c. $65,000
d. $180,000
In general, if a consumer good is produced domestically and consumed domestically, an
increase in its price will have which of the following effects?
a. The consumer price index will increase relatively more than will the GDP deflator.
b. The consumer price index and the GDP deflator will increase by the same amount.
c. The consumer price index will increase relatively less than will the GDP deflator.
d. One cannot generalize about the increase in the consumer price index relative to the
increase in the GDP deflator.
When the price level falls
a. people want to hold more money.
b. the interest rate rises.
c. investment spending rises.
d. All of the above are correct.
The source of the supply of loanable funds is
a. saving, and the source of the demand for loanable funds is investment.
b. consumption, and the source of the demand for loanable funds is investment.
c. investment, and the source of the demand for loanable funds is saving.
d. the interest rate, and the source of the demand for loanable funds is saving.
Technological knowledge
a. is the same thing as human capital.
b. can be discovered but it can never be kept secret.
c. is a determinant of productivity.
d. does not play a role in the relationship that economists call the production function.
If the budget deficit increases, then
a. an increase in the interest rate increases net capital outflow.
b. an increase in the interest rate decreases net capital outflow.
c. a decrease in the interest rate increases net capital outflow.
d. a decrease in the interest rate decreases net capital outflow.
Volume, as reported in stock tables, refers to the
a. number of shares traded.
b. percentage of shares outstanding traded.
c. number of shares traded times the price they sold at.
d. number of shares of a company traded divided by the shares of all companies traded.
Suppose demand is perfectly inelastic, and the supply of the good in question decreases.
As a result,
a. the equilibrium quantity decreases, and the equilibrium price is unchanged.
b. the equilibrium price increases, and the equilibrium quantity is unchanged.
c. the equilibrium quantity and the equilibrium price both are unchanged.
d. buyers’ total expenditure on the good is unchanged.
The cross-price elasticity of demand can tell us whether goods are
a. normal or inferior.
b. elastic or inelastic.
c. luxuries or necessities.
d. complements or substitutes.
Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland
has had an inflation rate of 25% for many years.
Refer to Monetary Policy in Southland. Suppose that the Southland Department of
Finance has run a public relations campaign claiming it will reduce inflation to 12.5%
and that it actually reduces inflation to that level. Suppose that the public was very
skeptical and in fact thought the Southland Department of Finance was going to raise
inflation to 30% so it could increase its expenditures. Then
a. unemployment falls, but it would have fallen less if people had been expecting 25%
inflation.
b. unemployment falls, but it would have fallen less if people had been expecting 35%
inflation.
c. unemployment rises, but it would have risen less if people had been expecting 25%
inflation.
d. unemployment rises, but it would have risen less if people had been expecting 35%
inflation.
Table 3-7
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed
to Make 1 Quantity Produced
in 2400 Hours
Refer to Table 3-7. We could use the information in the table to draw a production
possibilities frontier for Japan and a second production possibilities frontier for Korea.
If we were to do this, measuring cars along the horizontal axis, then
a. the slope of Japan’s production possibilities frontier would be -5 and the slope of
Korea’s production possibilities frontier would be -3.
b. the slope of Japan’s production possibilities frontier would be -0.2 and the slope of
Korea’s production possibilities frontier would be -0.33.
c. the slope of Japan’s production possibilities frontier would be 0.2 and the slope of
Korea’s production possibilities frontier would be 0.33.
d. the slope of Japan’s production possibilities frontier would be 5 and the slope of
Korea’s production possibilities frontier would be 3.
On May 25, 1980 three pals graduated from high school, pooled together $3,000 and
put the money into an account promising to pay 8% for the next 30 years. On May 25,
2010 they withdrew all the money from the account. To the nearest dollar, how much
did they withdraw?
a. $25,962
b. $27,297
c. $30,188
d. None of the above are correct to the nearest dollar.
Table 3-4
Assume that the farmer and the rancher can switch between producing meat and
producing potatoes at a constant rate.
Labor Hours Needed
to Make 1 Pound of Pounds Produced
in 24 Hours
Refer to Table 3-4. The opportunity cost of 1 pound of meat for the rancher is
a. 1/2 pound of potatoes.
b. 2 hours of labor.
c. 2 pounds of potatoes.
d. 3 hours of labor.
Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result,
residents of Wisconsin who do not like breathing second-hand smoke begin driving
across the border to Illinois to eat at restaurants there. Which of the following principles
does this best illustrate?
a. People respond to incentives
b. Rational people think at the margin
c. Trade can make everyone better off
d. Markets are usually a good way to organize economic activity
Figure 3-8
Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
Refer to Figure 3-8. If Chile and Colombia switch from each country dividing its time
equally between the production of coffee and soybeans to each country spending all of
its time producing the good in which it has a comparative advantage, then total
production of soybeans will increase by
a. 3 pounds.
b. 6 pounds.
c. 9 pounds.
d. 12 pounds.
Other things the same, which of the following happens if the price level falls?
a. Money demand shifts rightward.
b. Initially there is an excess demand for money in the money market.
c. The interest rate falls.
d. None of the above is correct.
Figure 6-2
Refer to Figure 6-2. The price ceiling causes a
a. surplus of 40 units.
b. surplus of 85 units.
c. shortage of 45 units.
d. shortage of 85 units.
Figure 2-3
Refer to Figure 2-3. This economy cannot produce at which point(s)?
a. J
b. J, L
c. J, L, M
d. L
The money supply decreases if the Fed
a. sells Treasury bonds. The larger the reserve requirement, the larger the decrease will
be.
b. sells Treasury bonds. The smaller the reserve requirement, the larger the decrease
will be.
c. buys Treasury bonds. The larger the reserve requirement, the larger the decrease will
be.
d. buys Treasury bonds. The smaller the reserve requirement, the larger the decrease
will be.
Which of the following can banks use to borrow from the Federal Reserve?
a. the discount window or 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. Banks can not borrow from the Federal Reserve, only the government can.
A production possibilities frontier can shift outward if
a. government increases the amount of money in the economy.
b. there is a technological improvement.
c. resources are shifted from the production of one good to the production of the other
good.
d. the economy abandons inefficient production methods in favor of efficient
production methods.
Which of the following is a way to compute GDP?
a. add up the wages paid to all workers
b. add up the quantities of all final goods and services
c. add up the market values of all final goods and services
d. add up the difference between the market values of all final goods and services and
then subtract the costs of producing those goods and services