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Figure 14.5 Refer to Figure 14.5. Assume the interest rate equals 8% and the money
supply decreases from to . If the interest rate remains at 8%:
A) money demand will increase.
B) money demand will decrease.
C) there will be an excess demand for money.
D) there will be an excess supply of money.
When two people engage in voluntary trade:
A) one will necessarily lose.
B) both will necessarily lose.
C) both will expect to be made better off.
D) each will expect to lose.
The money multiplier is equal to
A) the government spending multiplier.
B) the marginal propensity to consume.
C) the reserve ratio.
D) 1/(reserve ratio).
Figure 18.2
Refer to Figure 18.2. In autarky, the maximum amount of fishing poles that Macadamia
can produce is
A) 40.
B) 100.
C) 120.
D) 160.
Recall Application 3, "Social Norms, Unemployment, and Perceived Happiness," to
answer the following questions:
According to the application, Andrew Clark found that the more ________ an
individual was, the ________ aggressive he or she was in looking for a job.
A) content; more
B) unhappy; more
C) lazy; less
D) in debt; less
All other things equal, a depreciation of the U.S. real exchange rate causes:
A) an increase in imports and a decrease in exports.
B) a decrease in imports and a decrease in exports.
C) an increase in imports and an increase in exports.
D) a decrease in imports and an increase in exports.
The theory of investment that emphasizes the roles of real interest rates and taxes is
known as the
A) accelerator model.
B) neoclassical theory of investment.
C) multiplier model.
D) Q-theory of investment.
According to the real business cycle theory, an adverse change in technology:
A) increases the productivity of labor, which causes real wages and output to decline.
B) decreases the productivity of labor, which causes real wages and output to increase.
C) decreases the productivity of labor, which causes real wages to fall and output to
decline.
D) increases the productivity of labor, which causes real wages and output to increase.
The ________ determines the supply of money.
A) Congress
B) President
C) Federal Reserve
D) banking system
Steel workers laid off from their jobs as the result of a recession are considered
A) structurally unemployed.
B) cyclically unemployed.
C) frictionally unemployed.
D) seasonally unemployed.
Under a fixed exchange rate system, if the inflation rate in the United States is 0 percent
a year and the inflation rate in Australia is 5 percent a year, then the U.S. real exchange
rate will
A) remain constant.
B) increase 5 percent a year.
C) decrease 5 percent a year.
D) may increase or decrease.
A centrally planned economy has a planning authority that decides
A) what products to produce.
B) how the products are produced.
C) who receives the products.
D) all of the above
A possible reason a nation might impose a protectionist policy such as a tariff is to:
A) increase the level of imports.
B) protect an infant industry from foreign competitors.
C) encourage specialization in the good in which the nation has a comparative
advantage.
D) slow domestic production.
The relationship between interest rates and investment spending is graphed as
A) an upward sloping curve.
B) a downward sloping curve.
C) a horizontal line.
D) a vertical line.
The fraction of additional income that is saved is called:
A) the marginal propensity of income.
B) the marginal propensity to save.
C) the marginal propensity to consume.
D) average consumption.
If an economy is represented by a point along its production possibilities curve,
A) it can produce more of one product even if it does not produce less of another
product.
B) it can produce more of one product only if it produces less of another product.
C) it cannot produce more of one product unless it stops producing the other product
entirely.
D) it cannot possibly produce more of one product, even if it produces less of another
product.
If firms have rational expectations and if they set prices and wages on this basis, then
prices and wages:
A) will always be at market-clearing levels.
B) will, on average, be set at market-clearing levels.
C) will always be above market-clearing levels.
D) will never be set at market-clearing levels.
Which of the following is an example of a nominal wage?
A) $2400 per month
B) $12 per hour
C) ¬120 million per year
D) All of the above are examples of nominal wages.
