Suppose that M is fixed but that P falls. According to the quantity equation which of the
following could both by themselves explain the decrease in P?
a. Yrose, Vrose
b. Yfell, Vfell
c. Yrose, Vfell
d. Yfell, Vrose
An increase in the demand for loanable funds increases the equilibrium interest rate and
decreases the equilibrium level of saving.
a. True
b. False
The multiplier effect
a. and the crowding-out effect both amplify the effects of an increase in government
expenditures.
b. and the crowding-out effect both diminish the effects of an increase in government
expenditures.
c. diminishes the effects of an increase in government expenditures, while the
crowding-out effect amplifies the effects.
d. amplifies the effects of an increase in government expenditures, while the
crowding-out effect diminishes the effects.
Other things the same, an increase in the expected price level shifts
a. short-run aggregate supply right.
b. short-run aggregate supply left.
c. aggregate-demand right.
d. aggregated-demand left.
Suppose a basket of goods and services has been selected to calculate the CPI and 2014
has been selected as the base year. In 2013, the basket’s cost was $80; in 2014, the
basket’s cost was $86; and in 2015, the basket’s cost was $90. The value of the CPI in
2015 was
a. 112.5 and the inflation rate was 12.5%.
b. 112.5 and the inflation rate was 4.6%.
c. 104.6 and the inflation rate was 4.6%.
d. 104.6 and the inflation rate was 12.5%.
Suppose that in 2010, the producer price index increases by 1.5 percent. As a result,
economists most likely will predict that
a. GDP will increase in 2011.
b. the producer price index will increase by more than 1.5 percent in 2011.
c. interest rates will decrease in the future.
d. the consumer price index will increase in the future.
The University of Iowa was voted the #1 “party school” in 2013. The University of
Iowa is located in Iowa City. At the end of August each year, the market demand for
beer in Iowa City
a. decreases.
b. increases.
c. remains constant, but we observe a movement downward and to the right along the
demand curve.
d. remains constant, but we observe a movement upward and to the left along the
demand curve.
Table24-12.Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
RefertoTable24-12.If the nominal interest rate was 8 percent in 2010, then
a. the real interest rate in 2010 was 3 percent.
b. the real interest rate in 2010 was 4 percent.
c. Will’s 2009 food expenditures in 2010 dollars amount to $5,800.
d. Will’s 2009 food expenditures in 2011 dollars amount to $6,200.
Which of the following is included in the consumption component of GDP?
a. household purchases of appliances.
b. household purchases of medical care.
c. household purchases of food.
d. All of the above are included in the consumption component of GDP.
In Belgium, Norway, and Sweden, the percentage of workers who belong to unions is
a. almost zero.
b. less than it is in the United States.
c. about the same as it is in the United States.
d. greater than it is in the United States.
Which of the following helps to explain why the inflation fallacy ia fallacy?
a. Increases in the price level can be created by increases in money demand.
b. Nominal incomes tend to rise at the same time that the price level is rising.
c. As the price level rises, the value of a dollar falls.
d. Inflation only changes nominal variables.
For the Bureau of Labor Statistics to place someone in the “unemployed” category, that
person must
a. be available for work.
b. have tried to find employment during the previous week.
c. have previously been employed.
d. All of the above are correct.
After much consideration, you have chosen Ireland over Spain for your Study Abroad
program next year. However, the deadline for your final decision is still months away
and you may reverse this decision. Which of the following events would prompt you to
reverse this decision?
a. The marginal benefit of going to Spain increases.
b. The marginal cost of going to Spain increases.
c. The marginal benefit of going to Ireland increases.
d. The marginal cost of going to Ireland decreases.
Members of the Board of Governors are appointed by the president of the U.S. and
confirmed by the U.S. Senate.
a. True
b. False
If Vand Mare constant and Y doubles, the quantity equation implies that the price level
a. falls to half its original level.
b. does not change.
c. doubles.
d. more than doubles.
Other things the same, if the central bank decreases the rate at which it increases the
money supply, then
a. unemployment and inflation rise in the short run.
b. unemployment rises and inflation falls in the short run.
c. unemployment falls and inflation rises in the short run.
d. unemployment and inflation fall in the short run.
Figure27-2. The figure shows a utility function for Britney.
RefertoFigure27-2. From the appearance of the utility function, we know that
a. if Britney owns a house, she would notconsider buying fire insurance.
b. Britney would prefer to hold a portfolio of stocks with an average return of 8 percent
and a standard deviation of 2 percent to a portfolio of stocks with an average return of 8
percent and a standard deviation of 5 percent.
c. Britney would prefer to hold a portfolio of stocks with an average return of 8 percent
and a standard deviation of 5 percent to a portfolio of stocks with an average return of 6
percent and a standard deviation of 3 percent.
d. All of the above are correct.
In a market economy, economic activity is guided by
a. the government.
b. corporations.
c. central planners.
d. self-interest and prices.
A government budget deficit
a. increases both net capital outflow and net exports.
b. decreases both net capital outflow and net exports.
c. increases net capital outflow and decreases net exports.
d. decreases net capital outflow and increases net exports.
When an increase in the price of one good lowers the demand for another good, the two
goods are called complements.
a. True
b. False
Which of the following transactions takes place in the markets for the factors of
production in the circular-flow diagram?
a. Dylan receives a salary for his work as a financial analyst for an investment firm.
b. Kristin buys two business suits to wear to her job as a Chief Information Officer.
c. Jim receives clean water in his home in exchange for paying his water bill.
d. Caroline owns a nail salon and receives payments from her clients for her services.
It costs a company $35,000 to produce 500 graphing calculators. The company’s cost
will be $35,080 if it produces an additional graphing calculator. If the company
produces 501 graphing calculators then
a. its average cost is greater than its marginal cost.
b. its average cost and its marginal cost are equal.
c. its average cost is less than its marginal cost.
d. This cannot be determined from the information given.
In the open-economy macroeconomic model, the market for loanable funds equates
national saving with
a. domestic investment.
b. net capital outflow.
c. national consumption minus domestic investment.
d. None of the above is correct.
If inflation is lower than what was expected,
a. creditors receive a lower real interest rate than they had anticipated.
b. creditors pay a lower real interest rate than they had anticipated.
c. debtors receive a higher real interest rate than they had anticipated.
d. debtors pay a higher real interest rate than they had anticipated.
Historical evidence for the U.S. economy indicates that
a. recessions have occurred roughly once every six years since the 1960s.
b. the unemployment rate usually decreases during a recession and increases shortly
after the recession ends.
c. real GDP usually remains roughly constant during a recession and decreases shortly
after the recession ends.
d. changes in real GDP over the business cycle are largely attributable to changes in
investment over the business cycle.
If a country has a trade surplus then
a. S > I and Y > C + I + G.
b. S > I and Y < C + I + G.
c. S < I and Y > C + I + G.
d. S < I and Y < C + I + G.
Last year a country’s real GDP grew by 2%, it’s inflation rate was 3%, and it’s
government budget deficit was about $200 billion. It’s debttoGDP ratio was unchanged.
About what was it’s debt at the start of last year?
a. 10.0 trillion
b. 6.7 trillion
c. 4 trillion
d. None of the above are correct.
Table24-7.The table below applies to an economy with only two goods hamburgers and
hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
RefertoTable24-7. If the base year is 2010, then the economy’s inflation rate is
a. 2 percent in 2010 and 7 percent in 2011.
b. 4.5 percent in 2010 and 5.2 percent in 2011.
c. 9 percent in 2010 and 5.5 percent in 2011.
d. 10 percent in 2010 and 6.36 percent in 2011.
The essence of science is
a. the laboratory experiment.
b. the scientific method.
c. the study of nature, but not the study of society.
d. All of the above are correct.
Table 23-10
A hypothetical country of Lahland produces only movies and popcorn. Quantities and
prices of these goods for the last several years are shown below. The base year is 2015 .
RefertoTable23-10.In which year was this country’s real GDP highest?
a. 2014
b. 2015
c. 2016
d. 2017