Suppose buyers of computers and printers regard the two goods as complements. Then
an increase in the price of computers will cause a(n)
a. decrease in the demand for printers and a decrease in the quantity supplied of
printers.
b. decrease in the supply of printers and a decrease in the quantity demanded of
printers.
c. decrease in the equilibrium price of printers and an increase in the equilibrium
quantity of printers.
d. increase in the equilibrium price of printers and a decrease in the equilibrium
quantity of printers.
If firms were faced with greater uncertainty because of concern that oil prices might
rise, they might decrease expenditures on capital. In response to this change, someone
who advocated “lean against the wind” policies might advocate
a. decreasing the money supply.
b. increasing taxes.
c. increasing government expenditures.
d. All of the above
Which of the following statements is correct about the relationship between the nominal
interest rate and the real interest rate?
a. The real interest rate is the nominal interest rate times the rate of inflation.
b. The real interest rate is the nominal interest rate minus the rate of inflation.
c. The real interest rate is the nominal interest rate plus the rate of inflation.
d. The real interest rate is the nominal interest rate divided by the rate of inflation.
Which of the following is notincluded in M1?
a. currency
b. demand deposits
c. savings deposits
d. traveler’s checks
The labor-force participation rate tells us the fraction of the population that has chosen
to participate in the labor market.
a. True
b. False
When a new good is introduced, consumers have more variety from which to choose,
and this in turn increases the cost of maintaining the same level of economic
well-being.
a. True
b. False
If you wish to rely on fundamental analysis to choose a portfolio of stocks, then you
have no choice but to do all the necessary research yourself.
a. True
b. False
Figure 35-2
Use the pair of diagrams below to answer the following questions.
RefertoFigure35-2. If the economy starts at C and 1, then in the short run, a decrease
in government expenditures moves the economy to
a. D and 2
b. D and 3.
c. E and 3.
d. None of the above is correct.
If a firm is a price taker, it operates in a
a. competitive market.
b. monopoly market.
c. oligopoly market.
d. monopolistically competitive market.
Archie has a savings account at a bank. If he earns 6 percent interest on his account and
if there is deflation, then his purchasing power rises by more than 6 percent over the
course of a year.
a. True
b. False
To increase domestic investment, a country must increase its saving.
a. True
b. False
Table 26-1
RefertoTable26-1. Assume that the closing price was also the average price at which
each stock transaction took place. What was the total dollar volume of Graco stock
traded that day?
a. $68,770,900
b. $6,877,090
c. $687,709
d. $6,877.1
When the market price is below the equilibrium price, suppliers are unable to sell all
they want to sell.
a. True
b. False
If foreign citizens earn less income in the U.S. than U.S. citizens earn in foreign
countries,
a. U.S. net factor payments from abroad are positive, and its GDP is larger than its GNP.
b. U.S. net factor payments from abroad are positive, and its GNP is larger than its
GDP.
c. U.S. net factor payments from abroad are negative, and its GDP is larger than its
GNP.
d. U.S. net factor payments from abroad are negative, and its GNP is larger than its
GDP.
If policymakers accommodate an adverse supply shock, then in the short run the
unemployment rate
a. and the inflation rate rise.
b. and the inflation rate fall.
c. rises and the inflation rate falls.
d. falls and the inflation rate rises.
Which of the following always uses prices and quantities from the same period?
a. both nominal and real GDP.
b. nominal GDP but not real GDP.
c. real GDP but not nominal GDP.
d. neither nominal or real GDP.
Many societies used gold as money, because
a. it is relatively rare.
b. it is durable.
c. it has a relatively low melting point.
d. All of the above are correct.
Suppose that in a closed economy GDP is equal to 15,000, government purchases are
equal to 3,000, consumption equals 10,500, and taxes equal 3,500. What are private
saving and public saving?
a. 1,500 and -500, respectively
b. 1,500 and 500, respectively
c. 1,000 and -500, respectively
d. 1,000 and 500, respectively
As the price level rises
a. people will want to buy more bonds, so the interest rate rises.
b. people will want to buy fewer bonds, so the interest rate falls.
c. people will want to buy more bonds, so the interest rate falls.
d. people will want to buy fewer bonds, so the interest rate rises.
When a corporation experiences financial problems, bondholders are paid before
stockholders.
a. True
b. False
Other things the same, an increase in the real exchange rate raises U.S. net exports.
a. True
b. False
When inflation rises, firms make
a. more frequent price changes. This raises their menu costs.
b. more frequent price changes. This reduces their menu costs.
c. less frequent price changes. This raises their menu costs.
d. less frequent price changes. This reduces their menu costs.
Figure 35-6
Use the graph below to answer the following questions.
RefertoFigure35-6. Curve 2 is the
a. long-run Phillips curve.
b. short-run Phillips curve.
c. long-run aggregate demand curve.
d. short-run aggregate demand curve.
The equipment and structures available to produce goods and services are called
a. physical capital.
b. human capital.
c. the production function.
d. technology.
In considering how to allocate its scarce resources among its various members, a
household considers
a. each member’s abilities.
b. each member’s efforts.
c. each member’s desires.
d. All of the above are correct.
To raise productivity, policymakers could
a. increase spending on education.
b. provide tax credits to firms for capital improvements.
c. fund research and development.
d. All of the above are correct.
A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the
exchange rate is 6.5 yuan per dollar then, the real exchange rate is
a. .867 so the good is more expensive in the U.S.
b. .867 so the good is more expensive in China.
c. 1.154 so the god is more expensive in the U.S.
d. 1.154 so the good is more expensive in China.
The sale of bonds
a. and stocks to raise money is called debt finance.
b. and stocks to raise money is called equity finance.
c. to raise money is called debt finance, while the sale of stocks to raise funds is called
equity finance.
d. to raise money is called equity finance, while the sale of stocks to raise funds is
called debt finance.
Friedman and Phelps concluded that
a. in the long run the Phillips curve is downward sloping, which is consistent with
classical theory.
b. in the long run the Philips curve is downward sloping, which is inconsistent with
classical theory.
c. in the long run the Phillips curve is vertical, which is consistent with classical theory.
d. in the long run the Phillips curve is vertical, which is inconsistent with classical
theory.
Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The
local currency is the dia. Namdian banks collectively hold 100 million dias of required
reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury
Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use
only demand deposits and so the money supply consists of demand deposits.
RefetoScenario29-1.Assuming the only other item Namdian banks have on their
balance sheets is loans, what is the value of existing loans made by Namdian banks?
a. 625 million dias
b. 875 million dias
c. 1,125 million dias
d. None of the above is correct.
The Volcker disinflation
a. had virtually no impact on output, just as the classical dichotomy suggested.
b. was associated with rising output, perhaps due to expansionary fiscal policy.
c. caused output to fall, but by less than the typical estimate of the sacrifice ratio
suggested.
d. None of the above is correct.
A quality men’s suit in the U.S. costs $400. The same suit costs 300 British pounds in
the U.K. The nominal exchange rate is .60 pounds per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the suit cheaper?
In 2009 President Barack Obama responded to recession
a. only by cutting taxes.
b. by cutting taxes and reducing government expenditures.
c. only by raising government expenditures.
d. by cutting taxes and by raising government expenditures.
If the MPC= 4/5, then the government purchases multiplier is
a. 5/4.
b. 4/5.
c. 5.
d. 20.
National defense and knowledge are generally considered to be
a. private goods.
b. public goods.
c. proprietary goods.
d. societal goods.
If the U.S. could produce 5 televisions per hour of labor and China could produce 3
televisions per hour of labor, would it necessarily follow that the U.S. should specialize
in television production? Explain your answer using the concepts of comparative and or
absolute advantage.
While on vacation in Europe you notice that a tablet computer is selling for 600 euros
in France and for 533 pounds in Britain. You also know that the exchange rates are .75
euros per dollar and .65 British pounds per dollar. Where is the number of dollars you
would pay for the tablet lower? How many dollars would you have to pay to buy it
there?
Suppose a war in the Middle East interrupts the flow of crude oil and oil prices
skyrocket around the world. For economists, this historical episode serves as a
Political events convince people that the assets of country x are now riskier. As a result
of this change which curves in the open-economy macroeconomic model shift and
which direction do they shift for country x?
Fifteen years ago your parents purchased some land with the idea of selling it later to
help pay your college expenses. They purchased the land for $100,000. They sold it for
$180,000. During the time they held it the price level rose from 80 to 120. If your
parents face a 25% tax rate, what was their real aftertax gain? (Hint: What’s the real
value of the land in current prices?)
Explain the effect on output and price level from an increase in the short-run
aggregate-supply curve.
Explain the main arguments in favor of economic stabilization.
Define the natural rate of unemployment and cyclical unemployment.
Michael Jordan’s rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9,
while the CPI in 2010 was 218.1. What is Michael Jordan’s rookie salary in 2010
dollars?
What you must give up to get something else is called the
If the supply of pencils, a substitute for pens, increases, what will happen to the
equilibrium price of pencils and to the equilibrium price of pens?
Consider the nations of Brazil, Mexico, and Pakistan. Over the past century, which of
these three nations has experienced, by far, slower economic growth than the other two
nations?
The idea that firms incur actual costs when they change prices is known as _____.
Firms in countries with lower inflation rates will change price _____ frequently
compared to those countries where inflation is higher.
Table 24-14
The table below lists the per pound prices of meat and potatoes for the months of
January, February, and March. Assume that the typical consumer buys 25 pounds of
meat and 15 pounds of potatoes each month, and that January is the base period.
RefertoTable24-14. Calculate the inflation rate for March.
“When workers acquire tools, they become more productive.” This statement reflects
the general fact that is a determinant of productivity.
One tradeoff society faces is between efficiency and equality. Define each term. If the
U.S. government redistributes income from the rich to the poor, explain how this action
affects equality as well as efficiency in the economy.
Derive the relation between savings, domestic investment, and net capital outflow using
the national income accounting identity.
List the two main functions performed by the Fed?
Suppose consumers expect the price of a good to be higher in the future than it is today.
Would the current demand for the good increase or decrease?