When the Fed lowers the growth rate of the money supply, it must take into account
a. only the short-run effect on production.
b. only the short-run effects on inflation and production.
c. only the long-run effect on inflation.
d. the long-run effect on inflation as well as the short-run effect on production.
An increase in the marginal cost of an activity necessarily means that people will no
longer engage in any of that activity.
a. True
b. False
The economy goes into recession. Which of the following lists contains things
policymakers could do to try to end the recession?
a. increase the money supply, increase taxes, increase government spending
b. increase the money supply, increase taxes, decrease government spending
c. increase the money supply, decrease taxes, increase government spending
d. decrease the money supply, increase taxes, decrease government spending
ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company
is raising funds in financial markets?
a. only ABC
b. only JLG
c. both ABC and JLG
d. neither ABC nor JLG
In 2009, based on concepts similar to those used to estimate U.S. employment figures,
the Italian adult non- institutionalized population was 51.070 million, the labor force
was 24.710 million, and the number of people employed was 22.765 million. According
to these numbers, the Italian labor-force participation rate and unemployment rate were
about
a. 48.4% and 7.9%.
b. 48.4% and 3.8%.
c. 44.6% and 7.9%
d. 44.6% and 3.8%
A country has $3 billion of domestic investment and net exports of $2 billion. What is
its saving?
a. $1 billion
b. $2billion
c. $3 billion
d. $5 billion
Social Security payments are indexed for inflation using
a. the CPI.
b. the PPI.
c. the GDP deflator.
d. real interest rates.
When quantity demanded exceeds quantity supplied at the current market price, the
market has a shortage, and market price will likely rise in the future to eliminate the
shortage.
a. True
b. False
Which of the following is a certificate of indebtedness?
a. stocks and bonds
b. stocks but not bonds
c. bonds but not stocks
d. neither stocks nor bonds
Capital flight raises a country’s real exchange rate.
a. True
b. False
An automobile manufacturer unexpectedly announces that it has hired a new chief
executive officer. It is widely believed that the presence of this individual will raise the
profitability of the corporation. At the same time interest rates unexpectedly rise. Which
of the above would tend to make the price of the stock rise?
a. the announcement and the rise in interest rates
b. the announcement but not the rise in interest rates
c. the rise in interest rates, but not the announcement
d. neither the announcement nor the rise in interest rates
The price level rises in the short run if
a. aggregate demand or aggregate supply shifts right.
b. aggregate demand shifts right or aggregate supply shifts left.
c. aggregate demand shifts left or aggregate supply shifts right.
d. aggregate demand or aggregate supply shifts right.
Suppose that efficiency wages become more common in the economy. Imposing
efficiency wages
a. increases the quantity demanded and decreases the quantity supplied of labor.
b. decreases the quantity demanded and increases the quantity supplied of labor.
c. increases the quantity demanded and decreases the quantity supplied of labor.
d. decreases the quantity demanded and increases the quantity supplied of labor.
In the U.S., the National Labor Relations Board is the government agency that enforces
workers’ right to unionize.
a. True
b. False
Greater scarcity of a natural resource is indicated
a. by an increase in the price of the resource, whether the price increase is less than or
greater than the rate of inflation.
b. only by an increase in the price of the resource that is less than the rate of inflation.
c. only by an increase in the price of the resource that is greater than the rate of
inflation.
d. only by an increase in the price of the resource that is caused by a decrease in supply
and is greater than the rate of inflation.
If the marginal propensity to consume is 6/7, then the multiplier is 7.
a. True
b. False
Which of the following is not correct?
a. The slope of a line will be a small positive number for a fairly flat upward-sloping
line.
b. The slope of a line will be a large positive number for a steep upward-sloping line.
c. The slope of a line will be a negative number for a downward-sloping line.
d. The slope of a line will be infinite for a horizontal line.
Within the U.S. population, teenagers (ages 16-19) have lower rates of labor-force
participation than adults of prime working age (ages 25-54), regardless of race or
gender.
a. True
b. False
If the Fed were to increase the money supply, inflation would increase and
unemployment would decrease in the short run.
a. True
b. False
Suppose the economy is in long-run equilibrium. If the government increases its
expenditures, eventually the increase in aggregate demand causes price expectations to
a. rise. This rise in price expectations shifts the short-run aggregate supply curve to the
right.
b. rise. This rise in price expectations shifts the short-run aggregate supply curve to the
left.
c. fall. This fall in price expectations shifts the short-run aggregate supply curve to the
right.
d. fall. This fall in price expectations shifts the short-run aggregate supply curve to the
left.
An unexpected increase in the price level that temporarily lowers real wages and
induces more employment and output in an economy, occurs in
a. nominal-supply theory.
b. stagflation.
c. misperceptions theory.
d. sticky-wage theory.
Which of the following is notincluded in U.S. GDP?
a. The market value of an oil change that Ben performs on his own car.
b. The market value of an oil change at Speedy Lube.
c. The market value of oil purchased by Ben.
d. Production of foreign citizens living in the United States that work in an oil
packaging facility.
An increase in the money supply causes the interest rate to fall, investment spending to
rise, and aggregate demand to shift right.
a. True
b. False
Which of the following will increase a country’s real GDP per person?
a. imposing restrictions on foreign trade and foreign investment
b. imposing restrictions on foreign trade and reducing restrictions on foreign investment
c. reducing restrictions on foreign trade and imposing restrictions on foreign investment
d. reducing restrictions on foreign trade and foreign investment
Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for
each lawn he mows. What’s the total contribution to GDP each time Tim mows a yard?
a. $1
b. $19
c. $20
d. $21
In the late 1970s, U.S. nominal interest rates were high and real interest rates were low,
but in the late 1990s, U.S. nominal interest rates were low and real interest rates were
high.
a. True
b. False
Normative conclusions
a. come from positive analysis alone.
b. are based on ignorance of positive analysis.
c. involve value judgments.
d. reflect the economist’s role as scientist.
The country of Growpaw does not trade with any other country. Its GDP is $20 billion.
Its government purchases $3 billion worth of goods and services each year, collects $4
billion in taxes, and provides $2 billion in transfer payments to households. Private
saving in Growpaw is $4 billion. What is investment in Growpaw?
a. $5 billion
b. $4 billion
c. $3 billion
d. $11 billion
It is possible to observe a positive nominal interest rate together with a negative real
interest rate.
a. True
b. False
Figure 32-1
RefertoFigure32-1. If the real interest rate is 6 percent, there will be pressure for
a. the real interest rate to fall.
b. the demand for loanable funds curve to shift left.
c. the supply for loanable funds curve to shift right.
d. All of the above are correct.
A firm might offer efficiency wages so its workers will eat a more nutritious diet and
therefore be healthier and more productive.
a. True
b. False
The two words most often used by economists are
a. prices and quantities.
b. resources and allocation.
c. supply and demand.
d. efficiency and equity.
For a college student who wishes to calculate the true costs of going to college, the
costs of room and board
a. should be counted in full, regardless of the costs of eating and sleeping elsewhere.
b. should be counted only to the extent that they are more expensive at college than
elsewhere.
c. usually exceed the opportunity cost of going to college.
d. plus the cost of tuition, equals the opportunity cost of going to college.
Economists view normative statements as
a. prescriptive, making a claim about how the world ought to be.
b. descriptive, making a claim about how the world is.
c. statements about the normal condition of the world.
d. pessimistic, putting the worst possible interpretation on things.