Which, if any, of the present values below are computed correctly?
a. A payment of $100 to be received one year from today, with a 2 percent interest rate,
has a present value of $98.81.
b. A payment of $200 to be received two years from today, with a 3 percent interest
rate, has a present value of $188.52.
c. A payment of $300 to be received three years from today, with a 4 percent interest
rate, has a present value of $234.34.
d. None of the above are correct to the nearest cent.
Who is not included in the labor force by the Bureau of Labor Statistics?
a. Calvin, who is on temporary layoff
b. Michael, who has retired and is not looking for work
c. Lauren, who does not have a job, but has applied for several in the last week
d. None of the above is correct.
For which of the following goods is the income elasticity of demand likely highest?
a. natural gas
b. doctor’s visits
c. hamburgers
d. boats
For the purpose of calculating GDP, investment is spending on
a. stocks, bonds, and other financial assets.
b. real estate and financial assets such as stocks and bonds.
c. capital equipment, inventories, and structures, including household purchases of new
housing.
d. capital equipment, inventories, and structures, excluding household purchases of new
housing.
Suppose a person receives an education in her home country. Which of the following
will tend to make the increase in GDP of the person’s home country larger than the
increase in this person’s income?
a. externalities and brain drain
b. externalities but not brain drain
c. brain drain but not externalities
d. neither externalities nor brain drain
A government budget deficit affects the supply of loanable funds, rather than the
demand for loanable funds, because
a. in our model of the loanable funds market, we define “loanable funds” as the flow of
resources available to fund private investment.
b. in our model of the loanable funds market, we define “loanable funds” as the flow of
resources available from private saving.
c. markets for government debt are fundamentally different from markets for private
debt.
d. of our assumption that the economy is closed.
Rosie is risk averse and has $1,000 with which to make a financial investment. She has
three options. Option A is a risk-free government bond that pays 5 percent interest each
year for two years. Option B is a low-risk stock that analysts expect to be worth about
$1,102.50 in two years. Option C is a high-risk stock that is expected to be worth about
$1,200 in four years. Rosie should choose
a. option A.
b. option B.
c. option C.
d. either option A or option B because Rosie is indifferent between those two options
and they are superior to option C.
Figure 6-4
Refer to Figure 6-4. A government-imposed price of $16 in this market could be an
example of a
(i) binding price ceiling.
(ii) non-binding price ceiling.
(iii) binding price floor.
(iv) non-binding price floor.
a. (i) only
b. (ii) only
c. (i) and (iv) only
d. (ii) and (iii) only
Table 3-8
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Labor Hours Needed
to Make 1 Quantity Produced
in 36 Hours
Refer to Table 3-8. Which of the following points would be on Min’s production
possibilities frontier, based on a 36-hour production period?
a. (3 parasols, 8 plates)
b. (8 parasols, 5 plates)
c. (11 parasols, 4 plates)
d. More than one of the above would be on Min’s production possibilities frontier.
Figure 19-3
Refer to this diagram to answer the questions below.
Refer to Figure 19-3. Which curve is determined by net capital outflow only?
a. the demand curve in panel a.
b. the demand curve in panel c.
c. the supply curve in panel a.
d. the supply curve in panel c.
What would happen to the equilibrium price and quantity of coffee if the wages of
coffee-bean pickers fell and the price of tea fell?
a. Price would fall, and the effect on quantity would be ambiguous.
b. Price would rise, and the effect on quantity would be ambiguous.
c. Quantity would fall, and the effect on price would be ambiguous.
d. Quantity would rise, and the effect on price would be ambiguous.
For an economy that engages in international trade, GDP is divided into four
components. Which of the following items is not one of those components?
a. consumption
b. taxes
c. government purchases
d. net exports
In 1998 the Russian government defaulted on its bonds. According to the
open-economy macroeconomic model, this should have
a. increased Russian interest rates and net exports.
b. reduced Russian interest rates and net exports.
c. increased Russian interest rates and reduced Russian net exports.
d. reduced Russian interest rates and increased Russian net exports.
Other things the same, a decrease in the price level makes consumers feel
a. less wealthy, so the quantity of goods and services demanded falls.
b. less wealthy, so the quantity of goods and services demanded rises.
c. more wealthy, so the quantity of goods and services demanded rises.
d. more wealthy, so the quantity of goods and services demanded falls.
Table 3-5
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed
to Make 1 Unit of Number of Units
Produced in 40 Hours
Refer to Table 3-5. England has an absolute advantage in the production of
a. cheese and Spain has an absolute advantage in the production of bread.
b. bread and Spain has an absolute advantage in the production of cheese.
c. both goods and Spain has an absolute advantage in the production of neither good.
d. neither good and Spain has an absolute advantage in the production of both goods.
Juanita decides to hire some additional workers for her vinyl siding factory. The
equilibrium wage is $14 per hour. Efficiency wage theory suggests that it is reasonable
for Juanita to offer
a. $14 per hour.
b. less than $14 per hour, since some people would be willing to work for less.
c. less than $14 an hour to prevent shirking.
d. more than $14 per hour, so as to attract a better pool of applicants.
You are considering staying in college another semester so that you can complete a
major in economics. In deciding whether or not to stay you should
a. compare the total cost of your education to the total benefits of your education.
b. compare the total cost of your education to the benefits of staying one more semester.
c. compare the cost of staying one more semester to the benefits of staying one more
semester.
d. compare the total benefits of your education to the cost of staying one more semester.
If the government of Colombia made policy changes that increased national saving, the
real exchange rate of the peso would
a. depreciate and Colombian net exports would rise.
b. depreciate and Colombian net exports would fall.
c. appreciate and Colombian net exports would rise.
d. appreciate and Colombian net exports would fall.
Minimum wages create unemployment in markets where they create a
a. shortage of labor. Unemployment of this type is called frictional.
b. shortage of labor. Unemployment of this type is called structural.
c. surplus of labor. Unemployment of this type is called frictional.
d. surplus of labor. Unemployment of this type is called structural.
Suppose the U.S. imposes an import quota on steel. U.S. exports
a. increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital
outflow increases.
b. increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital
outflow is unchanged.
c. decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital
outflow is unchanged.
d. decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital
outflow decreases.
Which of the following is an asset of a bank and a liability for its customers?
a. deposits of its customers and loans to it customers
b. deposits of its customers but not loans to its customers
c. loans of its customers but not the deposits of its customers
d. neither the deposits of its customers nor the loans to its customers
Edgar is working part-time. Diane is on temporary layoff. Who is included in the
Bureau of Labor Statistics’ “employed” category?
a. only Edgar
b. only Diane
c. both Edgar and Diane
d. neither Edgar nor Diane
Contractionary monetary policy
a. leads to disinflation and makes the short-run Phillips curve shift right.
b. leads to disinflation and makes the short-run Phillips curve shift left.
c. does not lead to disinflation but makes the short-run Phillips curve shift right.
d. does not lead to disinflation but makes the short-run Phillips curve shift left.
Profits not paid out to stockholders are
a. retained earnings.
b. known as dividends.
c. the denominator in the price-earnings ratio.
d. All of the above are correct.
The shoeleather cost of inflation refers to
a. the redistributional effects of unexpected inflation.
b. the time spent searching for low prices when inflation rises.
c. the waste of resources used to maintain lower money holdings.
d. the increased cost to the government of printing more money.
In national income accounting, we use which of the following pairs of terms
interchangeably?
a. “investment” and “private saving”
b. “investment” and “purchases of stocks and bonds”
c. ‘saving” and “national saving”
d. “public saving” and “government tax revenue minus government spending”
Table 6-1
Refer to Table 6-1. Suppose the government imposes a price ceiling of $1 on this
market. What will be the size of the shortage in this market?
a. 0 units
b. 2 units
c. 8 units
d. 10 units
Figure 7-9
Refer to Figure 7-9. If the supply curve is S, the demand curve is D, and the
equilibrium price is $100, what is the producer surplus?
a. $625
b. $1,250
c. $2,500
d. $5,000
Figure 7-12
Refer to Figure 7-12. Area B represents
a. the combined profits of all producers when the price is P2.
b. the increase in producer surplus to all producers as the result of an increase in the
price from P1 to P2.
c. producer surplus to new producers entering the market as the result of an increase in
the price from P1 to P2.
d. that portion of the increase in producer surplus that is offset by a loss in consumer
surplus when the price increases from P1 to P2.
Figure 7-17
Refer to Figure 7-17. Which area represents producer surplus when the price is P1?
a. A
b. B
c. C
d. D
Capital flight refers to
a. the movement of workers across international borders in response to exchange rate
changes.
b. the movement of funds between financial intermediaries when interest rates change.
c. the ability of foreign direct investment to lift a country out of poverty.
d. a large and sudden movement of funds out of a country.
Peru has exports of $31.5 million and imports of $30 million. Peru
a. sells more overseas then it buys from overseas; it has a trade deficit.
b. sells more overseas then it buys from overseas; it has a trade surplus.
c. buys more from overseas then it sells overseas; it has a trade deficit.
d. buys more from overseas then it sells overseas; it has a trade surplus.
Using the rule of 70, about how much would $100 be worth after 50 years if the interest
rate were 7 percent?
a. $400
b. $800
c. $1,600
d. $3,200
If the interest rate is r percent, then the rule of 70 says that your savings will double
about every
a. 70/(1 – r) years.
b. 70/(1 + r) years.
c. 70/r years.
d. 70(1 + r)/r years.
Suppose some country had an adult population of about 46 million, a labor-force
participation rate of 75 percent, and an unemployment rate of 8 percent. How many
people were unemployed?
a. 2.54 million
b. 2.76 million
c. 3.68 million
d. 8 million