The slope of the demand for loanable funds curve represents the
a. positive relation between the real interest rate and investment.
b. negative relation between the real interest rate and investment.
c. positive relation between the real interest rate and saving.
d. negative relation between the real interest rate and saving.
Which tool of monetary policy does the Federal Reserve use most often?
a. term auctions
b. open-market operations
c. changes in reserve requirements
d. changes in the discount rate
According to the efficient markets hypothesis, stocks follow a random walk so that
stocks that increase in price one year are more likely to increase than decrease in the
next year.
a. True
b. False
If the interest rate is 4%, in which of the following cases is the future value the largest?
a. An initial value of $1,000 deposited for 5 years.
b. An initial value of $950 deposited for 6 years.
c. An initial value of $900 deposited for 7 years.
d. An initial value of $850 deposited for 8 years.
When the government has a budget surplus
a. it buys more of its bonds from the public than it sells to the public.
b. it spends more than it receives in tax revenue.
c. private saving is greater than zero.
d. exports are greater than imports.
Table 3-37
Assume that Aruba and Iceland can switch between producing coolers and producing
radios at a constant rate.
RefertoTable3-37.Aruba should export
a. coolers and import radios.
b. radios and import coolers.
c. both goods and import neither good.
d. neither good and import both goods.
When a production possibilities frontier is bowed outward, the opportunity cost of one
good in terms of the other depends on how much of each good is being produced.
a. True
b. False
Figure 33-5.
RefertoFigure33-5. In Figure 33-5,
a. Point B represents a short-run equilibrium and a long-run equilibrium.
b. Point B represents a short-run equilibrium, and Point A represents a long-run
equilibrium.
c. Point B represents a long-run equilibrium, and Point A represents a short-run
equilibrium.
d. Point B represents a long-run equilibrium, and Point C represents a short-run
equilibrium.
Table 23-10
A hypothetical country of Lahland produces only movies and popcorn. Quantities and
prices of these goods for the last several years are shown below. The base year is 2015 .
RefertoTable23-10.In which year was this country’s nominal GDP highest?
a. 2014
b. 2015
c. 2016
d. 2017
If the Fed conducts open-market purchases, the money supply
a. increases and aggregate demand shifts right.
b. increases and aggregate demand shifts left.
c. decreases and aggregate demand shifts right.
d. decreases and aggregate demand shifts left.
An increase in the budget deficit
a. reduces investment because the interest rate rises.
b. reduces investment because the interest rate falls.
c. raises investment because the interest rate rises.
d. raises investment because the interest rate falls.
Figure 4-2
RefertoFigure4-2.Suppose Phil and Miss Kay are the only consumers in the market. If
the price is $10, then the market quantity demanded is
a. 0 units.
b. 2 units.
c. 4 units.
d. 6 units.
Table29-7.
RefetoTable29-7. If the Fed requires a reserve ratio of 6 percent, then what quantity of
excess reserves does the Bank of Springfield now hold?
a. $9,600
b. $10,800
c. $10,200
d. $9,000
The concept of slope can be used to answer questions about how much one variable
responds to changes in another variable.
a. True
b. False
Table 3-7
Assume that the farmer and the rancher can switch between producing meat and
producing potatoes at a constant rate.
Refer to Table3-7. Assume that the farmer and the rancher each has 24 labor hours
available. If each person divides his time equally between the production of meat and
potatoes, then total production is
a. 6 pounds of meat and 4.5 pounds of potatoes.
b. 5.5 pounds of meat and 8 pounds of potatoes.
c. 12 pounds of meat and 9 pounds of potatoes.
d. 5 pounds of meat and 5.5 pounds of potatoes.
Over the period 1900-2010, which of the following countries experienced the highest
average annual growth rate of real GDP per person?
a. Brazil
b. China
c. India
d. Pakistan
The labor-force participation rate equals the percentage of the labor force that is either
employed or unemployed.
a. True
b. False
Which of the following actions best illustrates moral hazard?
a. A person adds risky stock to his portfolio.
b. A person who has narrowly avoided many accidents applies for automobile
insurance.
c. A person is unwilling to buy a stock when she believes its price has an equal chance
of rising or falling $10.
d. A person purchases homeowners insurance and then checks his smoke detector
batteries less frequently.
In the late 1960s, economist Edmund Phelps published a paper that
a. argued that there was no long-run tradeoff between inflation and unemployment.
b. disproved Friedman’s claim that monetary policy was effective in controlling
inflation.
c. showed the optimal point on the Phillips curve was at an unemployment rate of 5
percent and an inflation rate of 2 percent.
d. argued that the Phillips curve was stable and that it would not shift.
Other things the same, when the price level rises more than expected, some firms will
have
a. higher than desired prices, which increases their sales.
b. higher than desired prices, which depresses their sales.
c. lower than desired prices, which increases their sales.
d. lower than desired prices, which depresses their sales.
The purchase of rice produced this period is included in GDP if the rice is
a. used in a meal a restaurant sells during the same period they buy the rice.
b. purchased by a family who uses it to make tuna casserole for its supper.
c. purchased by a frozen food company to increase its inventory.
d. B and C are correct.
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.
Studies have shown significant spending changes arise from interest rate changes after
a. a few days.
b. a few weeks.
c. a few months.
d. about a year and a half..
Other things the same, if there is an increase in the money supply growth rate that is
larger than expected, then in the short run
a. the natural rate of unemployment rises.
b. the natural rate of unemployment falls.
c. the unemployment rate will be above its natural rate.
d. the unemployment rate will be below its natural rate.
An American brewery sells dollars to obtain euros. It then uses the euros to buy
brewing equipment from a German company. These transactions
a. increase U.S. net capital outflow because Germans obtain U.S. assets.
b. decrease U.S. net capital outflow because Germans obtain U.S. assets.
c. increase U.S. net capital outflow because the U.S. buys capital goods.
d. decrease U.S. net capital outflow because the U.S. buys capital goods.
Table 23-5
The country of Caspir produces only cereal and milk. Quantities and prices of these
goods for the last several years are shown below. The base year is 2015.
Prices and Quantities
RefertoTable23-5.In 2017, this country’s
a. real GDP was $900, and the GDP deflator was 138.9.
b. real GDP was $1250, and the GDP deflator was 128.0.
c. real GDP was $900, and the GDP deflator was 128.0.
d. real GDP was $1250, and the GDP deflator was 138.9.
Monopolists are price takers.
a. True
b. False
Economists mostly agree that the Great Depression was principally caused by factors
that shifted short-run aggregate supply left.
a. True
b. False
For two individuals who engage in the same two productive activities, it is impossible
for one of the two individuals to
a. have a comparative advantage in both activities.
b. have an absolute advantage in both activities.
c. be more productive per unit of time in both activities.
d. gain from trade with each other.
According to the political business cycle theory, if the Fed wanted to see a President
re-elected, prior to the election it might
a. lower the discount rate and sell bonds.
b. lower the discount rate and buy bonds.
c. raise the discount rate and sell bonds.
d. raise the discount rate and buy bonds.
When unions raise wages in one part of the economy, the supply of labor increases in
other parts of the economy, which reduces wages in industries that are not unionized.
a. True
b. False