Sectoral shifts contribute to structural unemployment.
a. True
b. False
In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a
small bag of charcoal for about $2.50. If the same goods today cost $6.00, then which
pair of CPIs would make the cost in today’s dollars the same for both years?
a. 60 in 1972 and 150 today
b. 65 in 1972 and 156 today
c. 75 in 1972 and 160 today
d. 90 in 1972 and 145.8 today
The logic of the exchange-rate effect begins with a change in the price level changing
the interest rate.
a. True
b. False
Lenders buy bonds and borrowers sell them.
a. True
b. False
Michael decides to hire some additional workers for his roofing company. The
equilibrium wage is $17 per hour. Efficiency wage theory suggests that it is reasonable
for Michael to offer
a. $17 per hour.
b. less than $17 per hour because some people would be willing to work for less.
c. less than $17 an hour to prevent shirking.
d. more than $17 per hour in order to attract a better pool of applicants.
The federal funds rate is the interest rate
a. the Federal Reserve charges for loans it makes to the federal government.
b. the Federal Reserve charges banks for short-term loans.
c. banks charge each other for short-term loans of reserves.
d. on newly issued one-year Treasury bonds.
Table 28-2
Labor Data for Aridia
RefetoTable28-2.The number of adults not in the labor force of Aridia in 2012 was
a. 200.
b. 1,400.
c. 1,600.
d. 3,000.
Suppose you are deciding whether to buy a particular bond. If you buy the bond and
hold it for 4 years, then at that time you will receive a payment of $10,000. If the
interest rate is 6 percent, you will buy the bond if its price today is no greater than
a. $8,225.06.
b. $7,920.94.
c. $7,672.58.
d. $6,998.98.
Suppose that the U.S. undertakes a policy to increase its saving rate. This policy will
likely
a. have no impact on the growth rate of real GDP per person.
b. decrease the growth of real GDP per person for a few years.
c. increase the growth of real GDP per person for several decades.
d. permanently increase the growth rate of real GDP per person.
You deposit Xdollars into a 3″year certificate of deposit that pays 4.75 percent annual
interest. At the end of the 3 years you have $4,229.70. What number of dollars, X, did
you deposit?
a. $3,680.00
b. $3,712.77
c. $3,750.00
d. $3,772.57
Figure26-4.On the horizontal axis of the graph, Lrepresents the quantity of loanable
funds in billions of dollars.
RefertoFigure26-4. If the equilibrium quantity of loanable funds is $56 billion and if
the rate of inflation is 4 percent, then the equilibrium real interest rate is
a. lower than 6 percent.
b. 6 percent.
c. between 6 percent and 8 percent.
d. higher than 8 percent.
Figure 4-11
RefertoFigure4-11. The movement from point A to point B on the graph is called
a. a decrease in supply.
b. an increase in supply.
c. an increase in the quantity supplied.
d. a decrease in the quantity supplied.
Which of the following happens in the market for loanable funds when there is capital
flight?
a. the demand curve shifts right.
b. the demand curve shifts left.
c. the supply curve shifts right.
d. the supply curve shifts left.
To improve living standards, policymakers should
a. impose restrictions on foreign competition.
b. formulate policies designed to increase productivity.
c. impose tougher immigration policies.
d. provide tax breaks for the middle class.
For purposes of calculating the CPI, the food & beverages category of consumer
spending includes the cost of
a. food away from home.
b. alcoholic beverages.
c. both food away from home and alcoholic beverages.
d. neither food away from home nor alcoholic beverages because these are included in
the recreation category of consumer spending.
You lose your job and, as a result, you buy more frozen pizzas. For you, frozen pizza
are a(n)
a. luxury good.
b. inferior good.
c. normal good.
d. complementary good.
In the openeconomy macroeconomic model, if a country’s interest rate falls, then its
a. net capital outflow and its net exports rise.
b. net capital outflow rises and its net exports fall.
c. net capital outflow falls and its net exports rise.
d. net capital outflow and its net exports fall.
The investment component of GDP measures spending on
a. financial assets such as stocks and bonds. During recessions it declines by a relatively
large amount.
b. residential construction, business equipment, business structures, and changes in
inventory. During recessions it declines by a relatively large amount.
c. financial assets such as stocks and bonds. During recessions it declines by a relatively
small amount.
d. residential construction, business equipment, business structures, and changes in
inventory. During recessions it declines by a relatively small amount.
Proponents of rational expectations argue that failing to account for peoples’ revised
inflation expectations led to estimates of the sacrifice ratio that were too high.
a. True
b. False
The time inconsistency of monetary policy means that
a. once people have formed expectations of low inflation based on a promise by the
central bank, the central bank is tempted to raise inflation to lower unemployment.
b. at some times central banks think it is more important to keep unemployment low; at
other times, they think it is more important to keep inflation low.
c. monetary policy is not consistent across time because it is influenced by politics.
d. monetary policy is not consistent across time because policymakers are incompetent.
Friedman and Phelps argued
a. that in the long run, monetary growth did not influence those factors that determine
the economy’s unemployment rate.
b. that the Phillips curve could be exploited in the long run by using monetary, but not
fiscal policy.
c. that the short-run Phillips curve was very steep, but not vertical.
d. that there was neither a short-run nor long-run tradeoff between inflation and
unemployment.
Which of the following shifts both the short-run and long-run aggregate supply right?
a. an increase in the actual price level
b. an increase in the expected price level
c. an increase in the capital stock
d. None of the above is correct.
In the nation of Wiknam, the money supply is $80,000 and reserves are $18,000.
Assuming that people hold only deposits and no currency, and that banks hold no
excess reserves, then the reserve requirement is
a. 29 percent.
b. 22.5 percent.
c. 16 percent.
d. None of the above is correct.
Suppose there is a surplus in the money market.
a. This could have been created by an increase in the money supply. The value of
money will rise.
b. This could have been created by an increase in the money supply. The value of
money will fall.
c. This could have been created by a decrease in the money supply. The value of money
will rise.
d. This could have been created by a decrease in the money supply. The value of money
will fall.
You receive money as payment for babysitting your neighbors’ children. This best
illustrates which function of money?
a. medium of exchange
b. unit of account
c. store of value
d. liquidity
According to 2012 data on the U.S. population, which of the following groups of
teenagers (ages 16-19) had the highest unemployment rate?
a. white males
b. white females
c. black males
d. black females
If your firm’s production function has constant returns to scale, and if you double all
your inputs, then your firm’s productivity will
a. not change.
b. increase but not double.
c. double.
d. more than double.
GDP is a good measure of economic well-being for all purposes.
a. True
b. False
Stimulus spending in 2009 was used for
a. building roads and bridges.
b. providing aid to local and state governments.
c. making payments to the unemployed.
d. All of the above are correct.
An example of an automatic stabilizer is
a. unemployment benefits.
b. a lowering of interest rates by the Fed.
c. a decrease in money demand.
d. a decrease in tax rates in response to a recession.
In the 1970s, the Fed accommodated a(n)
a. adverse supply shock and so contributed to higher inflation.
b. adverse supply shock and so contributed to lower inflation.
c. favorable supply shock and so contributed to higher inflation.
d. favorable supply shock and so contributed to lower inflation.
A stove is produced by a firm in 2014, added to the firm’s inventory in 2014, and sold to
a household in 2015. It follows that
a. the value of the good is added to the investment category of 2014 GDP, added to the
consumption category of 2015 GDP, and subtracted from the investment category of
2015 GDP.
b. the value of the good is added to the investment category of 2014 GDP, added to the
consumption category of 2015 GDP, and not included in the investment category of
2015 GDP.
c. the value of the good is added to the investment category of 2014 GDP, subtracted
from the consumption category of 2015 GDP, and not included in the investment
category of 2015 GDP.
d. the value of the good is added to the investment category of 2014 GDP, subtracted
from the consumption category of 2015 GDP, and added to the investment category of
2015 GDP.