The slope of the supply of loanable funds is based on the logic that an increase in
interest rates
a. makes saving more attractive.
b. makes saving less attractive.
c. makes investment more attractive.
d. makes investment less attractive.
M2 is both larger and less liquid than M1.
a. True
b. False
Which of the following statements is correct?
a. The consumer price index is a measure of the overall level of prices, whereas the
GDP deflator is not a measure of the overall level of prices.
b. If, in the year 2011, the consumer price index has a value of 123.50, then the inflation
rate for 2011 must be
23.50 percent.
c. Compared to the GDP deflator, the consumer price index is the more common gauge
of inflation.
d. The consumer price index and the GDP deflator reflect the goods and services bought
by consumers equally well.
Which of the following is the primary cause of inflation?
a. an increase in the quantity of money
b. an increase in government spending
c. an increase in unemployment
d. an increase in productivity
Any policy change that reduced the natural rate of unemployment
a. would shift the long-run Phillips curve to the right.
b. would shift the long-run aggregate-supply curve to the right.
c. would be a policy change that impeded the functioning of the labor market.
d. All of the above are correct.
Which of these statements best represents the law of demand?
a. When buyers’ tastes for a good increase, they purchase more of the good.
b. When income levels increase, buyers purchase more of most goods.
c. When the price of a good decreases, buyers purchase more of the good.
d. When buyers’ demands for a good increase, the price of the good increases.
Figure 4-5
RefertoFigure4-5.Which of the following would cause the demand curve to shift from
Demand B to Demand A in the market for oranges in the United States?
a. a freeze in Florida
b. a technological advance that allows oranges to ripen faster
c. a decrease in the price of apples
d. an announcement by the FDA that oranges prevent heart disease
President Truman once said he wanted to find a one-armed economist because when he
asked his economists for advice, they always answered, “On the one hand, … On the
other hand, …” Truman’s observation that economists’ advice is not always
straightforward
a. is rooted in the principle that people face tradeoffs.
b. indicates that economists recognize that there are opportunity costs associated with
policy decisions.
c. confirms that economists are not suited to be presidential advisers.
d. More than one of the above is correct.
Figure 35-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output
and on the right-hand diagram, U represents the unemployment rate.
RefertoFigure35-3.What is measured along the vertical axis of the right-hand graph?
a. the interest rate
b. the inflation rate
c. the government’s budget deficit as a percent of GDP
d. the growth rate of the nominal money supply
A vertical long-run Phillips curve is consistent with
a. the conclusion of Friedman and Phelps, but it is not consistent with the classical idea
of monetary neutrality.
b. the classical idea of monetary neutrality, but it is not consistent with the conclusion
of Friedman and Phelps.
c. both the conclusion of Friedman and Phelps and the classical idea of monetary
neutrality.
d. neither the conclusion of Friedman and Phelps nor the classical idea of monetary
neutrality.
Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving =
$15,000.
RefertoScenario26-1.This economy’s government is running a
a. budget surplus of $3,000.
b. budget surplus of $12,000.
c. budget deficit of $3,000.
d. budget deficit of $12,000.
A decrease in supply shifts the supply curve to the left.
a. True
b. False
In some countries in Sub-Saharan Africa real GDP per person has been stagnant for
many years.
a. True
b. False
A survey of professional economists revealed that more than three-fourths of them
agreed with fourteen economic propositions. Which of the following is not one of those
propositions?
a. A ceiling on rents reduces the quantity and quality of housing available.
b. Fiscal policy has a significant stimulative impact on a less than fully employed
economy.
c. The gap between Social Security funds and expenditures will become unsustainably
large within the next fifty years if current policies remain unchanged.
d. The United States should implement universal health care for its citizens.
For purposes of analyzing the money stock and its relationship to relevant economic
variables, money is best thought of as
a. those items that can be readily accessed and used to buy goods and services.
b. currency only.
c. currency plus all bank accounts.
d. currency plus all bank accounts plus bonds.
Teenagers have more frequent unemployment spells so, on average, they spend more
time searching for jobs. Other thing the same, this means that teenagers have a
a. higher unemployment rate. If a larger portion of the adult population were teenaged,
the natural rate of unemployment would be higher.
b. higher unemployment rate. The portion of the adult population that is teenaged does
not affect the natural rate of unemployment.
c. lower unemployment rate. If a larger portion of the adult population were teenaged,
the natural rate of unemployment would be lower.
d. lower unemployment rate. The portion of the adult population that is teenaged does
not affect the natural rate of unemployment.
In 2009 Greece’s budget deficit rose and people became worried about the ability of the
Greek government to make payments on its debt. Which of the these events reduces a
country’s real exchange rate?
a. an increase in the budget deficit, and increased concerns about the ability of the
government to pay back its debt
b. an increase in the budget deficit, but not increased concerns about the ability of the
government to pay back its debt
c. increased concerns about the ability of the government to pay back its debt, but not
an increase in the budget deficit
d. neither an increase in the budget deficit, nor increased concerns about the ability of
the government to pay back its debt
Other things the same, a country could move from having a trade deficit to having a
trade surplus if either
a. saving rose or domestic investment rose.
b. saving rose or domestic investment fell.
c. saving fell or domestic investment rose.
d. saving fell or domestic investment fell.
When the Federal Reserve conducts open-market operations to increase the money
supply, it
a. redeems Federal Reserve notes.
b. buys government bonds from the public.
c. raises the discount rate.
d. decreases its lending to member banks.
After the 1982 recession, the U.S. and world economies entered into a long period
a. of high unemployment rates.
b. high inflation rates.
c. that has become known as the “Great Moderation.”
d. that has become known as the “Great Recession.”
Which of the following is a store of value?
a. currency
b. U.S. government bonds
c. fine art
d. All of the above are correct.
A decrease in expected inflation shifts
a. the long-run Phillips curve left.
b. the short-run Phillips curve left.
c. neither the short-run nor long-run Phillips curve left.
d. both the short-run and long-run Phillips curve left.
Figure 2-1
RefertoFigure2-1. Which arrow represents the flow of goods and services?
a. A
b. B
c. C
d. D
An excess supply of money is eliminated by a decrease in the value of money.
a. True
b. False
Figure 4-26
RefertoFigure4-26.Which of the following movements would illustrate the effect in the
market for Ramen noodles of a decrease in the incomes of young adults, assuming that
Ramen noodles are an inferior good?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
Automatic stabilizers
a. increase the problems that lags cause in using fiscal policy as a stabilization tool.
b. are changes in taxes or government spending that increase aggregate demand without
requiring policy makers to act when the economy goes into recession.
c. are changes in taxes or government spending that policy makers quickly agree to
when the economy goes into recession.
d. All of the above are correct.
Which of the following is nota commonly-cited explanation for the decreasing
labor-force participation rates for men from 1950 to the present?
a. availability of reliable birth control
b. men acquiring additional years of schooling before entering the labor force
c. a preference for men to retire when younger
d. changing social attitudes about stay-at-home fathers
Economic models can help us understand reality only when they include all details of
the economy.
a. True
b. False
According to the theory of liquidity preference, which variable adjusts to balance the
supply and demand for money?
a. interest rate
b. money supply
c. quantity of output
d. price level
By holding insurance a person
a. reduces the risk of a bad outcome, such as their house burning down.
b. shares risk and so reduces the burden of risk.
c. Both A and B are correct.
d. Neither A nor B are correct.
Figure 3-24
The production possibilities frontiers below show how much Bob and Betty can each
produce in 8hours of time.
RefertoFigure3-24.Bob has
a. an absolute and comparative advantage producing good x.
b. an absolute but not a comparative advantage producing good x.
c. a comparative but not an absolute advantage producing good x.
d. neither a comparative nor an absolute advantage producing good x.