In which case(s) does(do) a country’s demand for loanable funds shift left?
a. both an increase in the budget deficit and capital flight
b. an increase in the budget deficit, but not capital flight
c. capital flight, but not an increase in the budget deficit
d. neither an increase in the budget deficit nor capital flight
Trade makes costs
a. higher and reduces the variety of goods and services available.
b. higher but raises the variety of goods and services available.
c. lower but reduces the variety of goods and services available.
d. lower and raises the variety of goods and services available.
Figure 4-17
Refer to Figure 4-17. If price is $25, then quantity demanded and quantity supplied,
respectively, are
a. 500 units and 500 units.
b. 500 units and 800 units.
c. 600 units and 600 units.
d. 800 units and 500 units.
Scenario 21-2. The following facts apply to a small, imaginary economy.
Consumption spending is $5,200 when income is $8,000.
Consumption spending is $5,536 when income is $8,400.
Refer to Scenario 21-2. The marginal propensity to consume for this economy is
a. 0.650.
b. 0.659.
c. 0.650 or 0.659, depending on whether income is $8,000 or $8,400.
d. 0.840.
A person who is counted as unemployed by the Bureau of Labor Statistics
a. is also in the labor force.
b. must have recently looked for work or be on temporary layoff.
c. must be at least 16 years old.
d. All of the above are correct.
The BLS classifies people who would like to work but have given up looking for a job
as
a. unemployed. If they were classified as out of the labor force, the reported
unemployment rate would be larger.
b. unemployed. If they were classified as out of the labor force, the reported
unemployment rate would be smaller.
c. out of the labor force. If they were classified as unemployed, the reported
unemployment rate would be larger.
d. out of the labor force. If they were classified as unemployed, the reported
unemployment rate would be smaller.
A surplus or shortage in the money market is eliminated by adjustments in the price
level according to
a. both liquidity preference theory and classical theory.
b. neither liquidity preference theory nor classical theory.
c. liquidity preference theory, but not classical theory.
d. classical theory, but not liquidity preference theory.
Figure 8-1
Refer to Figure 8-1. Suppose the government imposes a tax of P’ – P”’. The area
measured by M represents
a. consumer surplus after the tax.
b. consumer surplus before the tax.
c. producer surplus after the tax.
d. producer surplus before the tax.
When the money market is drawn with the value of money on the vertical axis, the
value of money increases if
a. either money demand or money supply shifts right.
b. either money demand or money supply shifts left.
c. money demand shifts right or money supply shifts left.
d. money demand shifts left or money supply shifts right.
The value of goods added to a firm’s inventory in a certain year is treated as
a. consumption, since the goods will be sold to consumers in another period.
b. intermediate goods, and so is not included in that year’s GDP.
c. investment, since GDP aims to measure the value of the economy’s production that
year.
d. spending on durable goods, since the goods could not be inventoried unless they
were durable.
Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where
the CPI is 125. Arlo’s job offer in Des Moines is for $48,000. How much does the New
York job have to pay in order for the two salaries to represent the same purchasing
power?
a. $23,040
b. $52,000
c. $79,200
d. $100,000
A Peruvian firm purchases construction equipment made in the U.S. and pays for it with
Peruvian currency. This transaction
a. increases U.S. net exports, and increases Peruvian net capital outflow.
b. increases U.S. net exports, and decreases Peruvian net capital outflow.
c. decreases U.S. net exports, and increases Peruvian net capital outflow.
d. decreases U.S. net exports, and decreases Peruvian net capital outflow.
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.
Table 7-7
The following table represents the costs of five possible sellers.
Refer to Table 7-7. If the market price is $900, the combined total cost of all
participating sellers is
a. $3,700.
b. $2,700.
c. $2,250.
d. $1,250.
Figure 4-7
Panel (a) Panel (b)
Refer to Figure 4-7. The graphs show the demand for cigarettes. In Panel (a), the
arrows are consistent with which of the following events?
a. Tobacco and marijuana are complements, and the price of marijuana decreased.
b. Tobacco is a “gateway drug,” and the price of marijuana increased.
c. The price of cigarettes increased.
d. The arrows are consistent with all of these events.
When the real exchange rate for the dollar depreciates, U.S. goods become
a. less expensive relative to foreign goods, which makes exports rise and imports fall.
b. less expensive relative to foreign goods, which makes exports fall and imports rise.
c. more expensive relative to foreign goods, which makes exports rise and imports fall.
d. more expensive relative to foreign goods, which makes exports fall and imports rise.
The natural unemployment rate includes
a. both frictional and structural unemployment.
b. neither frictional nor structural unemployment.
c. structural, but not frictional unemployment.
d. frictional, but not structural unemployment.
There is an adverse supply shock. In response the Federal Reserve pursues an
expansionary monetary policy. Taking into account both the shock and the Federal
Reserve’s policy, which of the following are we sure of?
a. unemployment will be higher
b. unemployment will be lower
c. inflation will be higher
d. inflation will be lower
Figure 6-25
Panel (a) Panel (b)
Panel (c)
Refer to Figure 6-25. In which market will the majority of the tax burden fall on
sellers?
a. market (a)
b. market (b)
c. market (c)
d. All of the above are correct.
The country of Freedonia has a GDP of $2,100, consumption of $1,200, and
government purchases of $400. This implies that it has
a. domestic investment of $500.
b. domestic investment plus net capital outflow of $500.
c. domestic investment minus net capital outflow of $500.
d. None of the above is correct.
According to classical macroeconomic theory, changes in the money supply affect
a. nominal variables and real variables.
b. nominal variables, but not real variables.
c. real variables, but not nominal variables.
d. neither nominal nor real variables.
Which of the following is correct?
a. Nominal and real interest rates always move together.
b. Nominal and real interest rates never move together.
c. Nominal and real interest rates do not always move together.
d. Nominal and real interest rates always move in opposite directions.
Figure 4-6
Refer to Figure 4-6. The shift from D to D” is called
a. an increase in demand.
b. a decrease in demand.
c. a decrease in quantity demanded.
d. an increase in quantity demanded.
Suppose the equilibrium price of a physical examination (“physical”) by a doctor is
$200, and the government imposes a price ceiling of $150 per physical. As a result of
the price ceiling, the
a. demand curve for physicals shifts to the right.
b. supply curve for physicals shifts to the left.
c. quantity demanded of physicals increases, and the quantity supplied of physicals
decreases.
d. number of physicals performed stays the same.
Figure 2-1
Refer to Figure 2-1. Which arrow represents the flow of land, labor, and capital?
a. A
b. B
c. C
d. D
“Monetary policy can be described either in terms of the money supply or in terms of
the interest rate.” This statement amounts to the assertion that
a. shifts of the money-supply curve cannot occur if the Federal Reserve decides to
target an interest rate.
b. the aggregate-demand curve will not shift in response to Federal Reserve actions if
the Fed decides to target an interest rate.
c. changes in monetary policy aimed at contracting aggregate demand can be described
either as decreasing the money supply or as raising the interest rate.
d. the activities of the Federal Reserve’s bond traders are irrelevant if the Federal
Reserve decides to target an interest rate.
If the United States changed its laws to allow for the legal sale of a kidney, which of the
following is least likely to occur?
a. The supply of kidneys would increase.
b. The shortage of kidneys would decrease.
c. Many lives would be saved.
d. The allocation of kidneys would be fair.
As an alternative to selling shares of stock as a means of raising funds, a large company
could, instead,
a. invest in physical capital.
b. use equity finance.
c. sell bonds.
d. purchase bonds.
Sometimes economists disagree because their scientific judgments differ. Which of the
following instances best reflects this source of disagreement?
a. One economist believes income tax cuts are unfair to those with low incomes;
another economist believes income tax cuts are not unfair to those with low incomes.
b. One economist believes unemployment causes more human suffering than does
inflation; another economist believes inflation causes more human suffering than does
unemployment.
c. One economist believes the policies of the Democratic party offer the best hope for
America’s future; another economist believes the policies of the Republican party offer
the best hope for America’s future.
d. One economist believes increases in the minimum wage increase unemployment;
another economist believes increases in the minimum wage do not increase
unemployment.
According to purchasing power parity, inflation in the U.S. causes the dollar to
a. depreciate relative to all other currencies.
b. depreciate relative to currencies of countries that have lower inflation rates.
c. appreciate relative to all other countries.
d. appreciate relative to currencies of countries that have lower inflation rates.
Which of the following is generally an opportunity cost of investment in human capital?
a. future job security
b. forgone present wages
c. increased earning potential
d. All of the above are correct.
Bill is restoring a car and has already spent $4000 on the restoration. He expects to be
able to sell the car for $5800. Bill discovers that he needs to do an additional $2400 of
work to make the car worth $5800 to potential buyers. He could also sell the car now,
without completing the additional work, for $3800. What should he do?
a. He should sell the car now for $3800.
b. He should keep the car since it wouldn”t be rational to spend $6400 restoring a car
and then sell it for only $5800.
c. He should complete the additional work and sell the car for $5800.
d. It does not matter which action he takes since the outcome will be the same either
way.
Table 10-4
The country of Caspir produces only cereal and milk. Quantities and prices of these
goods for the last several years are shown below. The base year is 2008.
Prices and Quantities
Refer to Table 10-4. This country’s inflation rate from 2009 to 2010 was
a. 16.4%.
b. 24.3%.
c. 41.0%.
d. 44.7%.
Income elasticity of demand measures how
a. the quantity demanded changes as consumer income changes.
b. consumer purchasing power is affected by a change in the price of a good.
c. the price of a good is affected when there is a change in consumer income.
d. many units of a good a consumer can buy given a certain income level.
Which of the following two effects of a decrease in the tax rate on saving would raise
savings?
a. the income effect and the substitution effect
b. the income effect but not the substitution effect
c. the substitution effect but not the income effect
d. neither the substitution effect nor the income effect