Figure 3-15
RefertoFigure3-15. The opportunity cost of 1 poem for Perry is
a. 1/12 novel.
b. 1/6 novel.
c. 2 novels.
d. 6 novels.
Figure27-2. The figure shows a utility function for Britney.
RefertoFigure27-2. From the appearance of the utility function, we know that
a. Britney is risk averse.
b. Britney gains less satisfaction when her wealth increases by Xdollars than she loses
in satisfaction when her wealth decreases by Xdollars.
c. the property of diminishing marginal utility applies to Britney.
d. All of the above are correct.
In the open-economy macroeconomic model, the amount of net capital outflow
represents the quantity of dollars
a. supplied for the purpose of selling assets domestically.
b. supplied for the purpose of buying foreign assets.
c. demanded for the purpose of buying U.S. net exports of goods and services.
d. demanded for the purpose of importing foreign goods and services.
Which of the following would cause stagflation?
a. aggregate demand shifts right
b. aggregate demand shifts left
c. aggregate supply shifts right
d. aggregate supply shifts left
Which of the following is correct?
a. NCO= NX
b. NCO+ I= NX
c. NX+ NCO= Y
d. Y = NCO– I
The law of one price states that
a. a good must sell at the price fixed by law.
b. a good must sell at the same price at all locations.
c. a good cannot sell for a price greater than the legal price ceiling.
d. nominal exchange rates will not vary.
In competitive markets, buyers
a. are price takers, but sellers are price setters.
b. are price setters, but sellers are price takers.
c. and sellers are price takers.
d. and sellers are price setters.
The recession of 2008-2009 was in many ways the worst macroeconomic event in more
than half a century.
a. True
b. False
If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was
real GDP?
a. $2.5 billion.
b. $10 billion.
c. $40 billion.
d. $100 billion.
When the dollar depreciates, each dollar buys
a. more foreign currency, and so buys more foreign goods.
b. more foreign currency, and so buys fewer foreign goods.
c. less foreign currency, and so buys more foreign goods.
d. less foreign currency, and so buys fewer foreign goods.
A U.S. bank loaned a Canadian oil company 1 million U.S. dollars. The Canadian
company then used the entire loan to buy mining equipment from a U.S. company.
As a result of these transactions, by how much and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?
Holding the nonprice determinants of demand constant, a change in price would
a. result in either a decrease in demand or an increase in demand.
b. result in a movement along a stationary demand curve.
c. result in a shift of supply.
d. have no effect on the quantity demanded.
According to the efficient markets hypothesis, which of the following would decrease
the price of stock in Veblen’s Leisure Company?
a. Veblen announces, just as everyone had expected, that it has fired its CEO who has
been accused of ethics violations.
b. Veblen announces, as the market had expected, that its profits were low.
c. Fundamental analysis published by KM Financial shows that Veblen’s stock is
undervalued.
d. A highly anticipated book is published by a Veblen insider which details Veblen’s
innovative technology in plain English, information that was previously unavailable to
the public and which will now be used by Veblen’s competitors.
Table 3-23
Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
RefertoTable3-23.The rancher has a comparative advantage in the production of
a. pork.
b. tomatoes.
c. both goods.
d. neither good.
If interest rates rose more in the U.S. than in France, then other things the same
a. U.S. citizens would buy more French bonds and French citizens would buy more
U.S. bonds.
b. U.S. citizens would buy more French bonds and French citizens would buy fewer
U.S. bonds.
c. U.S. citizens would buy fewer French bonds and French citizens would buy more
U.S. bonds.
d. U.S. citizens would buy fewer French bonds and French citizens would buy fewer
U.S. bonds.
If an electric power plant does not bear the entire cost of the pollution it emits, it will
a. not emit any pollution so as to avoid the entire cost of the pollution.
b. emit lower levels of pollution.
c. emit an acceptable level of pollution.
d. emit too much pollution.
The quantity theory of money implies that if output and velocity are constant, then a 50
percent increase in the money supply would lead to less than a 50 percent increase in
the price level.
a. True
b. False
Table 26-2
RefertoTable26-2.Which company had the lowest earnings per share?
a. Boeing Co.
b. Eli Lilly and Co.
c. Kraft
d. Kellogg Co.
In 2009 President Obama and Congress increased government spending. Some
economists thought this increase would have little effect on output. Which of the
following would make the effect of an increase in government expenditures on
aggregate demand smaller?
a. the interest rate falls and aggregate supply is relatively flat
b. the interest rate falls and aggregate supply is relatively steep
c. the interest rate rises and aggregate supply is relatively flat
d. the interest rate rises and aggregate supply is relatively steep
If the quality of a good deteriorates while its price remains the same, then the value of a
dollar
a. rises and the cost of living increases.
b. rises and the cost of living decreases.
c. falls and the cost of living increases.
d. falls and the cost of living decreases.
Which of the following explains why production rises in most years?
a. increases in the labor force
b. increases in the capital stock
c. advances in technological knowledge
d. All of the above are correct.
Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal,
international tensions, and loss of confidence in policymakers, people become
pessimistic regarding the future and retain that level of pessimism for some time.
RefertoPessimism.In the long run, the change in price expectations created by
pessimism shifts
a. long-run aggregate supply right.
b. long-run aggregate supply left.
c. short-run aggregate supply right.
d. short-run aggregate supply left.
In an open economy, the source for the demand for loanable funds is
a. national saving.
b. national saving + net capital outflow.
c. investment
d. investment + net capital outflow
For most students, the earnings they give up to attend college are
a. a minor cost when compared to the costs of tuition, room and board, and the like.
b. the single largest cost of their education.
c. about equal to the costs of room and board at college.
d. not considered true costs by an economist.
If there is an increase in the money supply, in the short run
a. the interest rises. It takes several weeks for spending to fully respond to this change.
b. the interest rises. It takes several months for spending to fully respond to this change.
c. the interest falls. It takes several weeks for spending to fully respond to this change.
d. the interest falls. It takes several months for spending to fully respond to this change.
Scenario 24-4
Quinn has job offers in Wrexington and across the country in Charlieville. The
Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would
pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in
Charlieville is 90.
RefertoScenario24-4.The Charlieville salary in Wrexington dollars is
a. $24,000.00.
b. $26,666.67.
c. $60,000.00
d. $66,666.67.
Other things the same, as the price level decreases it induces greater spending on
a. both net exports and investment.
b. net exports but not investment.
c. investment but not net exports.
d. neither net exports nor investment.
The purchase of a new house is the one form of
a. investment that is financed by private saving rather than public saving.
b. household spending that is not counted as part of investment in the national income
accounts.
c. household spending that is investment rather than consumption.
d. household spending that does not contribute to GDP.
Which of the following is notimplied by the quantity equation?
a. If velocity is stable and money is neutral, an increase in the money supply creates a
proportional increase in nominal output.
b. If velocity is stable and money is neutral, an increase in the money supply creates a
proportional increase in the price level.
c. With constant money supply and output, an increase in velocity creates an increase in
the price level.
d. With constant money supply and velocity, an increase in output creates a proportional
increase in the price level.
Figure 3-25
RefertoFigure3-25.Colombia should specialize in the production of
a. coffee and import soybeans.
b. soybeans and import coffee.
c. both goods and import neither good.
d. neither good and import both goods.
The model of short-run economic fluctuations focuses on
a. the price level and real GDP.
b. productivity and economic growth.
c. the neutrality of money and inflation.
d. None of the above is correct.
Suppose the economy is in long-run equilibrium. In a short span of time, there is a
sharp rise in the stock market, an increase in government purchases, an increase in the
money supply and a decline in the value of the dollar. In the short run
a. the price level and real GDP will both rise.
b. the price level and real GDP will both fall.
c. neither the price leave nor real GDP will change.
d. All of the above are possible.
Market failure can be caused by
a. low consumer demand.
b. equilibrium prices.
c. externalities and market power.
d. high prices and foreign competition.
Figure 4-8
RefertoFigure4-8.Suppose the figure shows the market demand for coffee. Suppose the
price of tea, a substitute good, increases. Which of the following changes would occur?
a. a movement along D2 from point A to point B
b. a movement along D2 from point B to point A
c. a shift from D1 to D2
d. a shift from D2 to D1