Net capital outflow equals
a. the value of domestic assets purchased by foreigners.
b. the value of foreign assets purchased by domestic residents.
c. the value of domestic assets purchased by foreigners – the value of foreign assets
purchased by domestic residents.
d. the value of foreign assets purchased by domestic residents – the value of domestic
assets purchased by foreigners.
Y = C+ I+ G+ NXis an identity because
a. each symbol identifies a macroeconomic variable.
b. the right-hand and left-hand sides are equal when an equilibrium is reached.
c. the equality holds due to the way the variables are defined.
d. None of the above is correct.
Who of the following would necessarily be included in the Bureau of Labor Statistics’
“unemployed” category?
a. Huey, who did not work during the previous four weeks
b. Dewey, who tried to find new employment during the previous four weeks
c. Louie, who was an unpaid worker during the previous four weeks
d. None of the above is correct.
Table 4-13
The demand schedule below pertains to sandwiches demanded per week.
RefertoTable4-13.Suppose Harry, Darby, and Jake are the only demanders of
sandwiches and that the market demand violates the law of demand. Then, in the table,
the value of x must be
a. less than or equal to 5.
b. greater than or equal to 5.
c. greater than or equal to 7.
d. greater than or equal to 10.
Which of the following policy alternatives would be an appropriate response to a sharp
increase in investment spending, assuming policymakers want to stabilize output?
a. increase taxes
b. increase the money supply
c. increase government expenditures
d. All of the above are correct.
The goal of macroeconomics is to explain the economic changes that affect many
households, firms, and markets simultaneously.
a. True
b. False
Which of the following are justifications for running a budget deficit?
a. stabilizing the economy during a recession
b. future generations will benefit from some current expenditures
c. both a and b
d. neither a nor b
A transfer payment is a payment made by
a. consumers, but not in exchange for a tangible product.
b. firms, but not in exchange for capital equipment.
c. foreigners, but not in exchange for a domestically-produced good or service.
d. government, but not in exchange for a currently produced good or service.
The Fed increases the reserve requirement, but it wants to offset the effects on the
money supply. Which of the following should it do?
a. sell bonds to increase reserves
b. sell bonds to decrease reserves
c. buy bonds to increase reserves
d. buy bonds to decrease reserves
If an economy can produce more of one good without giving up any of another good,
then the economy’s current production point is inefficient.
a. True
b. False
In the open-economy macroeconomic model, the purchase of a capital asset by
domestic residents adds to the demand for loanable funds
a. only if the asset is located at home.
b. only if the asset is located abroad.
c. whether the asset is located at home or abroad.
d. None of the above is correct.
Suppose that over the past year, the real interest rate was 6 percent and the inflation rate
was -2 percent. It follows that
a. the dollar value of savings increased at 4 percent, and the purchasing power of
savings increased at 6 percent.
b. the dollar value of savings increased at 4 percent, and the purchasing power of
savings increased at 8 percent.
c. the dollar value of savings increased at 8 percent, and the purchasing power of
savings increased at 4 percent.
d. the dollar value of savings increased at 8 percent, and the purchasing power of
savings increased at 6 percent.
Other things the same, if a country raises its saving rate, when is growth of real GDP
per person higher?
a. as the economy moves toward the long run and in the long run.
b. as the economy moves toward the long run, but not in the long run.
c. in the long run, but not as the economy moves toward the long run.
d. neither as the economy moves toward the long run, nor in the long run.
If the money multiplier decreased from 20 to 12.5, then
a. the Fed increased the reserve ratio from 5 percent to 8 percent.
b. the Fed increased the fed funds rate from 5 percent to 8 percent.
c. the Fed decreased the reserve ratio from 8 percent to 5 percent.
d. the Fed decreased the fed funds rate from 8 percent to 5 percent.
Table29-6.
RefetoTable29-6. Assume the Fed’s reserve requirement is 5 percent and all banks
besides the Bank of Pleasantville are exactly in compliance with the 5 percent
requirement. Further assume that people hold only deposits and no currency. Starting
from the situation as depicted by the T-account, if the Bank of Pleasantville decides to
make new loans so as to end up with no excess reserves, then by how much does the
money supply eventually increase?
a. $10,833.33.
b. $13,000.
c. $8,333.33.
d. $10,000.
If the reserve ratio is 5 percent, then $500 of additional reserves can create up to
a. $10,500 of new money.
b. $10,000 of new money.
c. $9,500 of new money.
d. $2,500 of new money.
A government may use deficit financing to smooth tax rates over time.
a. True
b. False
Which of the following is a cause of the changing role of women in American society
over the past several decades?
a. new technologies that have reduced the amount of time required to complete routine
household tasks
b. improved birth control
c. changing political and social attitudes
d. All of the above are correct.
The long-run aggregate supply curve shifts right if
a. technology improves.
b. the price level decreases.
c. the money supply increases.
d. All of the above are correct.
An increase in government spending
a. increases the interest rate and so investment spending increases.
b. increases the interest rate and so investment spending decreases.
c. decreases the interest rate and so increases investment spending increases.
d. decreases the interest rate and so investment spending decreases.
Economists at the Congressional Budget Office estimated that for 2012, the U.S. natural
rate of unemployment was about 5.5 percent.
a. True
b. False
Monetary neutrality means that while real variables may change in response to changes
in the money supply, nominal variables do not.
a. True
b. False
When colonists in Virginia used tobacco as money, their money
a. was commodity money.
b. had no intrinsic value.
c. was fiat money.
d. had no store of value.
If purchasing-power parity holds, a dollar will buy
a. one unit of each foreign currency.
b. foreign currency equal to the U.S. price level divided by the foreign country’s price
level.
c. enough foreign currency to buy as many goods as it does in the United States.
d. None of the above is implied by purchasing-power parity.
There are ways that policymakers could reduce the costs of inflation without reducing
inflation.
a. True
b. False
Consider the following sequence of events:
price level ↑ demand for money ↑ equilibrium interest rate ↑⇒ ⇒
quantity of goods and services demanded ↓⇒
Τhis sequence explains why the
a. money-supply curve is vertical.
b. aggregate-demand curve shifts leftward in response to a monetary injection.
c. aggregate-demand curve shifts rightward in response to a monetary injection.
d. aggregate-demand curve slopes downward.
The CPI is calculated
a. weekly.
b. monthly.
c. quarterly.
d. yearly.
In the open-economy macroeconomic model, the quantity of dollars demanded in the
market for foreign-currency exchange
a. depends on the real exchange rate. The quantity of dollars supplied in the
foreign-exchange market depends on the real interest rate.
b. depends on the real interest rate. The quantity of dollars supplied in the
foreign-exchange market depends on the real exchange rate.
c. and the quantity of dollars supplied in the market for foreign-currency exchange
depend on the real exchange rate.
d. and the quantity of dollars supplied in the market for foreign-currency exchange
depend on the real interest rate.
A bank might make mortgages to people in different regions of the country. By doing so
a. the bank reduces the risk it faces from falling house prices in its region and falling
prices in all regions.
b. the bank reduces the risk it faces of falling house prices in its region but not from
falling prices in all regions.
c. the bank reduces the risk it faces of falling house prices in all regions, but not the risk
it faces from falling house prices in its regions.
d. the bank reduces neither the risk it faces from falling house prices in its region nor
falling prices in all regions.
A macroeconomist, rather than a microeconomist, would study the effects on a market
from two firms merging.
a. True
b. False
Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh
Holloway, is an accountant today and he earned $210,000 in 2013. The price index was
17.6 in 1944 and 218.4 in 2013.
RefertoScenario24-3. In real terms, Sue Holloway’s income amounts to about what
percentage of Josh Holloway’s income?
a. 11.0 percent
b. 65.2 percent
c. 70.9 percent
d. 114.7 percent
You hold bonds issued by the city of Sacramento, California. The interest you earn each
year on these bonds
a. is not subject to federal income tax and so these bonds pay a higher interest rate than
otherwise comparable bonds issued by the U.S. government.
b. is not subject to federal income tax and so these bonds pay a lower interest rate than
otherwise comparable bonds issued by the U.S. government.
c. is subject to federal income tax and so these bonds pay a higher interest rate than
otherwise comparable bonds issued by the U.S. government.
d. is subject to federal income tax and so these bonds pay a lower interest rate than
otherwise comparable bonds issued by the U.S. government.
Assume a central bank follows a rule that requires it to take steps to keep the price level
constant. If the price level fell because of a decrease in aggregate demand and an
increase in aggregate supply that kept output unchanged, then
a. the central bank would have to raise interest rates which would decrease output.
b. the central bank would have to raise interest rates which would increase output.
c. the central bank would have to reduce interest rates which would decrease output.
d. the central bank would have to reduce interest rates which would increase output.
Figure 2-1
RefertoFigure2-1. Which arrow represents the flow of land, labor, and capital?
a. A
b. B
c. C
d. D
If the nominal interest rate is 7 percent and the rate of inflation is 3 percent, then the
real interest rate is
a. 7 percent.
b. 4 percent.
c. 3 percent.
d. 10 percent.