Government-run employment agencies and public training programs are operated by
the government to try to facilitate job search and reduce unemployment.
a. Almost all economists agree that such programs are of no use.
b. Almost all economists agree that such programs work very well.
c. Some economists claim that the government can do these things no better than firms
and individuals could do them for themselves.
d. Some economists claim that these programs increase frictional unemployment.
Figure30-2. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
RefetoFigure30-2. At the end of 2009 the relevant money-demand curve was the one
labeled MD2. At the end of 2010 the relevant money-demand curve was the one labeled
MD1. Assuming the economy is always in equilibrium, what was the economy’s
approximate inflation rate for 2010?
a. -43 percent
b. -57 percent
c. 57 percent
d. 75 percent
If money demand shifted to the right and the Federal Reserve desired to return the
interest rate to its original value, it could
a. buy bonds to increase the money supply.
b. buy bonds to decrease the money supply.
c. sell bonds to increase the money supply.
d. sell bonds to decrease the money supply.
For an economy as a whole,
a. the market value of production must equal expenditure.
b. investment must equal the value of stocks and bonds purchased.
c. wages must equal income.
d. consumption must equal saving.
Table31-1
RefertoTable31-1.What are Bolivia’s exports?
a. $60 billion
b. $35 billion
c. $10 billion
d. None of the above are correct.
The Bureau of Labor Statistics’ household survey and establishment survey both yield
information about unemployment.
a. True
b. False
Pens are normal goods. What will happen to the equilibrium price of pens if the price of
pencils rises, consumers experience an increase in income, writing in ink becomes
fashionable, people expect the price of pens to rise in the near future, the population
increases, fewer firms manufacture pens, and the wages of pen-makers increase?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.
Figure 2-13
Refer to Figure2-13. Which of the following combinations of points are both efficient
and attainable for this economy?
a. G, H
b. F, I, L
c. F, G, H, I, L
d. J, K
A transfer payment is
a. a payment for moving expenses a worker receives when he or she is transferred by an
employer to a new location.
b. a payment that is automatically transferred from your bank account to pay a bill or
some other obligation.
c. a form of government spending that is not made in exchange for a currently produced
good or service.
d. the benefit that a person receives from an expenditure by government minus the taxes
that were collected by government to fund that expenditure.
In the long run, which of the following would shift the long-run Phillips curve to the
right?
a. an increase in the minimum wage
b. an increase in government spending
c. an increase in the money supply
d. a decrease in the money supply
Table 28-1
Sample Population
RefetoTable28-1.How many in the sample are unemployed?
a. 5
b. 4
c. 3
d. 2
Over one time horizon or another, Fed policy decisions influence
a. inflation and employment.
b. inflation but not employment.
c. employment but not inflation.
d. neither inflation nor employment.
The slope of a line is the ratio of the vertical distance covered to the horizontal distance
covered along the line.
a. True
b. False
A severe problem that many economists have with the active use of monetary policy
and fiscal policy to stabilize the economy is that, while those policies obviously work
well in practice, they are not well understood on a theoretical level.
a. True
b. False
In order for the standard of living within a country to be enhanced over time, which of
the following is essential?
a. The role of the country’s government in the economy must become larger.
b. The population of the country must increase.
c. More domestic natural resources must be discovered and used.
d. The level of productivity must increase.
Job search
a. is one reason economies always experience some unemployment.
b. is the process of matching workers with appropriate jobs.
c. would not be a problem if all workers and all jobs were the same.
d. All of the above are correct.
Clint puts $200 into an account when the interest rate is 8 percent. Later he checks his
balance and finds that he has a balance of about $272.10. How many years did Clint
wait to check his balance?
a. 3 years
b. 3.5 years
c. 4 years
d. 4.5 years
Which of the following would a macroeconomist consider as investment?
a. Marisa purchases a bond issued by Proctor and Gamble Corp.
b. Karlee purchases stock issued by Texas Instruments, Inc.
c. Charlie builds a new coffee shop.
d. All of the above are correct.
Mutual funds are a type of financial intermediary.
a. True
b. False
To explain the long-run determinants of the price level and the inflation rate, most
economists today rely on the
a. quantity theory of money.
b. price-index theory of money.
c. theory of hyperinflation.
d. disequilibrium theory of money and inflation.
Suppose the interest rate is 10 percent. Which of the following payments has the largest
present value?
a. You receive $90.91 two years from today.
b. You receive $82.64 one year from today.
c. You receive $75.13 today.
d. All of these payments have the same present value to the nearest cent.
According to the misperceptions theory of aggregate supply, if a firm thought that
inflation was going to be 5 percent and actual inflation was 6 percent, then the firm
would believe that the relative price of what it produce had
a. increased, so it would increase production.
b. increased, so it would decrease production.
c. decreased, so it would increase production.
d. decreased, so it would decrease production.
Which of the following values would be included in U.S. GDP for 2015?
a. the rent that Sam, an American citizen, would have paid on his home in Houston in
2015 had he not owned that home.
b. the rent that Jim, an American citizen, paid on his apartment in San Francisco in
2015.
c. the value of the legal services provided by Juan, an attorney and a Mexican citizen,
who lived in San Antonio and practiced law there in 2015
d. All of the above would be included in U.S. GDP for 2015.
Educated people may generate ideas that increase production. These ideas
a. produce a return to society from education that is greater than the return to the
individual.
b. could justify government subsides for education.
c. are external benefits of education.
d. All of the above are correct.
According to purchasing-power parity, if it took 58 Indian rupees to buy a dollar today,
but it took 55 to buy it a year ago, then the dollar has
a. appreciated, indicating inflation was higher in the U.S. than in India.
b. appreciated, indicating inflation was lower in the U.S. than in India.
c. depreciated, indicating inflation was higher in the U.S. than in India.
d. depreciated, indicating inflation was lower in the U.S. than in India.
The marginal propensity to consume (MPC) is defined as the fraction of
a. extra income that a household consumes rather than saves.
b. extra income that a household either consumes or saves.
c. total income that a household consumes rather than saves.
d. total income that a household either consumes or saves.
Which of the following is included in M1 and M2?
a. traveler’s checks
b. savings deposits
c. money market mutual funds
d. small time deposits
Most economists believe unions are bad for the economy as a whole.
a. True
b. False
Figure 3-13
Refer to Figure3-13. Suppose Madagascar is willing to trade 40 rubies to Peru for each
emerald that Peru produces and sends to Madagascar. Which of the following
combinations of emeralds and rubies could Peru then consume, assuming Peru
specializes in emerald production?
a. 2 emeralds and 240 rubies
b. 3 emeralds and 220 rubies
c. 4 emeralds and 200 rubies
d. 5 emeralds and 140 rubies
Funsters, Inc., the largest toy company in the country, sells its most popular doll for
$15. It has just learned that its leading competitor, Toysorama, is mass-producing an
excellent copy and plans to flood the market with their $5 doll in six weeks. Funsters
should
a. “fight fire with fire” by decreasing supply of its doll for six weeks and then
increasing the supply.
b. increase the supply of its doll now before the other doll hits the market.
c. increase the price of its doll now.
d. discontinue its doll.
Are credit cards and debit cards money? What’s the difference between credit and debit
cards?
What is the source of the demand for dollars in the market for foreign-currency
exchange?
What’s the difference between firm-specific risk and market risk? Will diversification
eliminate one or both? Explain.
Scenario 24-5
Suppose the residents of Mediaville spend all of their income on books, CDs, and
DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for
$900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for
$1,250. Assume that the market basket for the CPI is defined in the base year.
RefertoScenario24-5.What are the prices of books, CDs, and DVDs in 2009?
Figure 28-7
RefetoFigure28-7. At a minimum wage of $125, how much is the surplus of labor?
Economists at which administrative department help formulate spending plans and
regulatory policies?
Suppose Stan Musial earned $115,000 in 1947. If the CPI was 82 in 1947, and was 246
in 1990, what is Stan Musial’s 1947 salary in 1990 dollars?
What particularly important role do courts play in a market economy?
What is meant by the natural rate of unemployment?
An increase in the government budget deficit causes national saving to _____, the
interest rate to _____, and investment to _____.
Who would be more likely to study the effects of government spending on the
unemployment rate, a macroeconomist or a microeconomist?
If the demand for a good increases at the same time as the supply of the same good
decreases, what will happen to the equilibrium price and quantity of the good?
A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1%
the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?
If velocity is 6, real output is 10,000, and M is 20,000 what would the price level be? If
M increases to 25,000 but V and Y do not change, what happens to the price level? Are
the change in the money supply and the change in the price level proportional?
The adult population in the town of Bedrock is 75 thousand. Within Bedrock, 5
thousand are unemployed, and 40 thousand are employed. Calculate the number of
people not in the labor force.
What is the source of the supply of loanable funds?