Economists define an efficient use of resources as a situation in which:
A) one person can be made better off but only by making another person worse off.
B) all persons can be made better off without making anyone worse off.
C) all persons receive an equal share of the resources.
D) all persons are made worse off when one person is made better off.
When inflation is high:
A) people will increase their level of real-money holdings.
B) people will save more.
C) lenders gain at the expense of borrowers.
D) people will decrease their level of real-money holdings.
The rule that governs a country’s policy toward its exchange rate is known as:
A) the fixed exchange rate system.
B) the floating exchange rate system.
C) an exchange rate regime.
D) the rules of exchange.
Which of the following about bank runs is FALSE?
A) They may start as a result of a rumor that a bank is in financial trouble.
B) Many banks’ depositors try to withdraw their funds because they fear a bank failure.
C) Bank runs typically happen only to small banks with few financial assets.
D) Bank runs often lead to a loss of faith in other banks, causing additional bank runs.
Table: Pizza Economy III
Look at the table Pizza Economy III. Considering 2010 as the base year, real GDP in
2011 was:
A) $47,000.
B) $69,000.
C) $72,000.
D) $114,000.
Other things equal, a recession in Mexico would cause U.S. exports to Mexico to
increase and U.S. aggregate demand to increase.
A) True
B) False
Currency in circulation is cash:
I. held by the public.
II. in the vaults of commercial banks.
III. in the vault of the Federal Reserve.
A) I only
B) II only
C) III only
D) I, II, and III
Periods in which output and employment are falling are:
A) recessions.
B) booms.
C) expansions.
D) deflations.
The aggregate supply curve shows the relationship between the _____ and the quantity
of aggregate output supplied.
A) price of oil
B) aggregate price level
C) price of money
D) level of employment
The unemployment rate will fall if potential output growth is:
A) higher than actual output growth.
B) lower than actual output growth.
C) equal to actual output growth.
D) higher than the inflation rate.
Banks can lend money because:
A) they have so much to lend.
B) they know not everyone wants their deposits back at the same time.
C) there is a high demand for commodity money.
D) they don’t know how much cash they have in their vault.
Suppose that the money supply increases by $150 million after the Federal Reserve
engages in an open market purchase of $50 million. Then the reserve ratio is:
A) 0.1.
B) 0.5.
C) 0.33.
D) 0.2.
The opportunity cost of holding money is:
A) zero.
B) the interest rate when someone uses a credit card.
C) the difference between interest rates on monetary assets and on nonmonetary assets.
D) the discount rate.
Scenario: Purchasing Power Parity
A car costs $30,000 in the United States and the exchange rate is $1 = 0.50. The same
car costs 12,000 in Britain.
Look at the scenario Purchasing Power Parity. What is the purchasing power parity of
the pound?
A) $5
B) $2.50
C) $1.25
D) $0.80
Figure: The Production Possibilities for Two Countries
Look at the figure The Production Possibilities for Two Countries. The opportunity cost
of producing 1 tire in Indonesia is _____ radio(s), while the opportunity cost of
producing 1 tire in Malaysia is _____ radio(s).
A) 0.5; 2
B) 2; 1
C) 600; 800
D) 800; 1,200
Look at the table Coffee and Salmon Production Possibilities II. This table shows the
maximum amounts of coffee and salmon, both measured in pounds, that Brazil and
Alaska can produce if they just produce one good. Brazil has an absolute advantage in
producing:
A) coffee only.
B) salmon only.
C) both coffee and salmon.
D) neither coffee nor salmon.
Which is most likely a macroeconomic, not microeconomic, question?
A) Is the national unemployment rate rising or falling?
B) Are consumers buying more bottled water and less fruit juice?
C) Are salaries for nurses rising or falling?
D) Should a tax be levied on each ton of carbon dioxide a factory emits?
Figure: Monetary Policy I
Look at the figure Monetary Policy I. If the economy is initially in equilibrium at E2and
the central bank chooses to sell Treasury bills:
A) AD2will shift to the right, causing an inflationary gap.
B) AD2may shift to AD1, causing a recessionary gap.
C) SRAS1will shift immediately to the left, closing an inflationary gap.
D) SRAS2will shift immediately to the right, increasing an inflationary gap.
A decrease in the demand for loanable funds would most likely be caused by a(n):
A) decrease in the inflation rate.
B) increase in the budget deficit.
C) decrease in expected business opportunities.
D) increase in expected business opportunities.
If Japan levies tariffs on U.S. goods entering Japan, this will tend to:
A) benefit both Japanese and U.S. producers.
B) damage U.S. producers and benefit Japanese producers.
C) benefit U.S. producers and damage Japanese producers.
D) damage both Japanese and U.S. producers.
Technological improvements will:
A) leave the production possibility frontier unchanged.
B) shift the production possibility frontier inward.
C) shift the production possibility frontier outward.
D) necessarily lead to increased unemployment.
A simultaneous rise in productivity and nominal wages would shift the short-run
aggregate supply curve to the:
A) right if the rise in nominal wages is larger than the rise in productivity.
B) right if the cost per unit of output rises.
C) left if the cost per unit of output falls.
D) left if the rise in nominal wages is larger than the rise in productivity.
A bank’s capital is the sum of its assets, its deposits, and its other liabilities.
A) True
B) False
Sweden has real GDP per capita of $50,000, while Chile has real GDP per capita of
$25,000. If real GDP per capita in Sweden grows at 2% and Chile’s real GDP per capita
grows at 4%, how long will it take for real GDP per capita in the two nations to
converge?
A) 10 years
B) 20 years
C) 25 years
D) 35 years
After passage of the American Recovery and Reinvestment Act in 2009 government
borrowing _____, and interest rates_____.
A) increased; increased to record levels
B) increased; remained very low
C) decreased; increased
D) decreased; decreased
Scenario: Money and Interest Rates
Banks decide to do away with fees charged when other banks’ customers use the bank’s
own ATM.
Look at the scenario Money and Interest Rates. If the money supply remains constant,
interest rates will likely:
A) decrease.
B) increase.
C) remain the same.
D) increase or decrease, depending upon what maximizes profits for the largest
commercial banks.
If the merchandise trade balance is “$15, net international transfer payments and net
international factor income are $4, the balance of payments on goods and services is
“$25, and the balance of payments on the financial account is $18, then the statistical
discrepancy in the financial account is:
A) $15.
B) $3.
C) “$3.
D) “$1.
If the interest rate on CDs rises from 5% to 10%, the opportunity cost of holding money
will _____ and the quantity demanded of money will _____.
A) increase; decrease
B) increase; increase
C) decrease; increase
D) decrease; decrease
Figure: Short-Run Determination of the Interest Rate
Look at the figure Short-Run Determination of the Interest Rate. If the money supply is
at MS1and the central bank buys Treasury bills, then in the short run the interest rate
will:
A) increase above r1.
B) remain at r1.
C) decrease to r2.
D) fluctuate randomly.
Suppose the government increases taxes by more than is necessary to close an
inflationary gap. Which of the following is the most likely result?
A) Equilibrium real GDP will be more than anticipated.
B) The economy will move into a recession.
C) The economy will generate a larger inflationary gap than anticipated.
D) This will not have any adverse effects on the economy, since inflation has been
abated.
Households supply resources in the factor markets.
A) True
B) False