Most economists believe that in the long run, changes in the money supply
a. affect nominal but not real variables. This view that money is ultimately neutral is
consistent with classical theory.
b. affect nominal but not real variables. This view that money is ultimately neutral is
inconsistent with classical theory.
c. affect real but not nominal variables. This view that money is ultimately neutral is
consistent with classical theory.
d. affect real but not nominal variables. This view that money is ultimately neutral is
inconsistent with classical theory.
For markets to work well, there must be
a. market power.
b. a central planner.
c. property rights.
d. abundant, not scarce, resources.
Trade-offs are involved in most policy decisions.
a. True
b. False
If countries that imported goods and services from the United States went into
recession, we would expect that U.S. net exports would
a. rise, making aggregate demand shift right.
b. rise, making aggregate demand shift left.
c. fall, making aggregate demand shift right.
d. fall, making aggregate demand shift left.
Which of the following is an example of U.S. foreign portfolio investment?
a. Albert, a German citizen, buys stock in a U.S. computer company.
b. Larry, a citizen of Ireland, opens a fish and chips restaurant in the United States.
c. Nancy, a U.S. citizen, buys bonds issued by a Japanese bank.
d. Dustin, a U.S. citizen, opens a country-western tavern in New Zealand.
A professor at a university finds a way to reduce the costs of producing automobile
glass. The method is very easy for anyone to copy. A company develops a substance
which prevents eyeglasses from smudging. It receives a patent on the formula. Which
of these are common technological knowledge?
a. the method to reduce costs of producing automobile glass, and the formula for the
substance that prevents smudging
b. the method to reduce costs of producing automobile glass, but not the formula for the
substance that prevents smudging
c. the formula for the substance that prevents smudging, but not the method to reduce
costs of producing automobile glass
d. neither the method to reduce costs of producing automobile glass nor the formula for
the substance that prevents smudging
When two variables move in opposite directions, the curve relating them is upward
sloping, and we say the variables are positively related.
a. True
b. False
Whenever a determinant of supply other than price changes, the supply curve shifts.
a. True
b. False
Other things the same, if the central bank decreases the rate at which it increases the
money supply, then in the long run
a. the short-run Phillips curve shifts right.
b. the short-run Phillips curve shifts left.
c. the long-run Phillips curve shifts right.
d. the long-run Phillips curve shifts left.
Table 28-5
Labor Force Statistics by Age
Suppose people in the adult population in a small country are classified based on their
age.
RefetoTable28-5. Suppose that the natural rate of unemployment is 5% for those under
55 and 3% for those 55 and older. The cyclical unemployment rate for those under 55 is
a. 0.88% which is greater than the cyclical unemployment rate for those 55 and older.
b. 0.88% which is less than the cyclical unemployment rate for those 55 and older.
c. -0.83% which is greater than the cyclical unemployment rate for those 55 and older.
d. -0.83% which is less than the cyclical unemployment rate for those 55 and older.
Changes in the interest rate bring the money market into equilibrium 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.
Public policy, without intending to do so, can increase frictional unemployment.
a. True
b. False
Figure30-3. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
RefetoFigure30-3. If the relevant money-supply curve is the one labeled MS1, then the
equilibrium price level is
a. 0.5 and the equilibrium value of money is 2.
b. 2 and the equilibrium value of money is 0.5.
c. 0.5 and the equilibrium value of money cannot be determined from the graph.
d. 2 and the equilibrium value of money cannot be determined from the graph.
Two goods are substitutes when a decrease in the price of one good
a. decreases the demand for the other good.
b. decreases the quantity demanded of the other good.
c. increases the demand for the other good.
d. increases the quantity demanded of the other good.
Figure 2-16
RefertoFigure2-16. The graph shown is known as a
a. time-series graph.
b. bar graph.
c. scatterplot.
d. pie chart.
Table 4-3
RefertoTable4-3. Whose demand does notobey the law of demand?
a. Bert’s
b. Ernie’s
c. Grover’s
d. Oscar’s
Which of these events would cause the consumer price index to overstate the increase
in the cost of living?
a. Car makers benefit from a new technology that allows them to sell higher-quality
cars to consumers with no increase in price.
b. Energy prices decrease, and consumers respond by buying more gas and electricity.
c. A new good is introduced that renders cellular telephones inferior and obsolete.
d. All of the above are correct.
Scenario25-1. An economy’s production form takes the form Y= AF(L, K, H, N).
RefertoScenario25-1. If the production function has the constant-returns-to-scale
property, then if we know the values of A, K/L, H/L,and N/L, we also know the value of
a. output.
b. labor productivity.
c. A.
d. All of the above are correct.
When taxes increase, the interest rate
a. increases, making the change in aggregate demand larger.
b. increases, making the change in aggregate demand smaller
c. decreases, making the change in aggregate demand larger.
d. decreases, making the change in aggregate demand smaller.
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.
When the Fed makes open-market sales bank
a. withdrawals and lending increase.
b. withdrawals increase and lending decreases.
c. deposits and lending increase.
d. deposits increase and lending decreases.
Aggregate demand shifts right when the Federal Reserve
a. raises personal income taxes.
b. increases the money supply.
c. institutes an investment tax credit.
d. All of the above are correct.
Real GDP is the yearly production of final goods and services valued at
a. current prices.
b. constant prices.
c. expected future prices.
d. the ratio of current prices to constant prices.
For the U.S. economy, which of the following is the most important reason for the
downward slope of the aggregate-demand curve?
a. the wealth effect
b. the interest-rate effect
c. the exchange-rate effect
d. the real-wage effect
A pharmaceutical company unexpectedly announces that it just developed an important
new drug. This news should
a. raise the price of the corporation’s stock; if it does not the stock is overvalued.
b. raise the price of the corporation’s stock; if it does not the stock is undervalued.
c. reduce the price of the corporation’s stock; if it does not the stock is overvalued.
d. reduce the price of the corporation’s stock; if it does not the stock is undervalued.
Writing in the WallStreetJournalin 2009, economist Jeremy Siegel argued that, in the
years leading up to the financial crisis of 2008″2009,
a. financial firms acted in too risky a fashion.
b. the Federal Reserve’s efforts to rein in the risky behavior of certain financial firms
were inadequate.
c. falling house prices “crashed the banks and the economy.”
d. All of the above are correct.
Suppose that some country had an adult population of about 25 million, a labor-force
participation rate of 60 percent, and an unemployment rate of 6 percent. How many
people were unemployed?
a. 0.846 million
b. 0.9 million
c. 1.5 million
d. 6 million
Which of the following raise the incentive for households to save?
a. means-testing of government benefits and inheritance taxes
b. means-testing of government benefits but not inheritance taxes
c. inheritance taxes, but not means-testing of government benefits
d. neither means-testing of government benefits nor inheritance taxes
Means-tested programs tend to favor
a. those with high income as would a consumption tax.
b. those with high income while a consumption tax would favor those with low income.
c. those with low income as would a consumption tax.
d. those with low income while a consumption tax would favor those with high income.
Jennifer took out a fixed-interest-rate loan when the CPI was 100. She expected the CPI
to increase to 103 but it actually increased to 105. The real interest rate she paid is
a. higher than she had expected, and the real value of the loan is higher than she had
expected.
b. higher than she had expected, and the real value of the loan is lower than she had
expected.
c. lower than she had expected, and the real value of the loan is higher than she had
expected.
d. lower then she had expected, and the real value of the loan is lower than she had
expected.
Figure 3-22
RefertoFigure3-22.What are Alice and Betty’s opportunity costs of 1 pitcher of
lemonade?
a. Alice’s opportunity cost of 1 pitcher of lemonade is 1/2 of a pizza and Betty’s
opportunity cost of 1 pitcher of lemonade is 2/3 of a pizza.
b. Alice’s opportunity cost of 1 pitcher of lemonade is 2 pizzas and Betty’s opportunity
cost of 1 pitcher of lemonade is 1.5 pizzas.
c. Alice’s opportunity cost of 1 pitcher of lemonade is 10 pizzas and Betty’s opportunity
cost of 1 pitcher of lemonade is 10 pizzas.
d. Alice’s opportunity cost of 1 pitcher of lemonade is 200 pizzas and Betty’s
opportunity cost of 1 pitcher of lemonade is 300 pizzas.
In an ideal labor market, wages would adjust to balance the quantity of labor supplied
and the quantity of labor demanded, ensuring that all workers are always fully
employed.
a. True
b. False
When the money market is drawn with the value of money on the vertical axis, if the
Federal Reserve sells bonds, then the money supply curve
a. shifts right, causing the price level to rise.
b. shifts right, causing the price level to fall.
c. shifts left, causing the price level to rise.
d. shifts left, causing the price level to fall.
Figure 34-7
RefertoFigure34-7. If the economy is at point b, a policy to restore full employment
would be
a. an increase in the money supply.
b. a decrease in government purchases.
c. an increase in taxes.
d. All of the above are correct.
Kelly and David are both capable of repairing cars and cooking meals. Which of the
following scenarios is not possible?
a. Kelly has a comparative advantage in repairing cars and David has a comparative
advantage in cooking meals.
b. Kelly has an absolute advantage in repairing cars and David has an absolute
advantage in cooking meals.
c. Kelly has a comparative advantage in repairing cars and in cooking meals.
d. David has an absolute advantage in repairing cars and in cooking meals.