Which of the following mechanisms helps output to return to potential after a demand
shock?
a. Change in business mentality
b. Change in nominal wage rate
c. Large changes in the capital stock
d. Inability of the price level to change
e. Change in inventories
A market with more than one seller and significant barriers to entry is called
Each of the following, except one, is an example of a nonmonetary job characteristic.
Which is the exception?
Which of the following would lead to an upward shift of the consumption-income line?
a. A decrease in income
b. A decrease in population
c. An increase in income
d. An increase in wealth
e. An increase in the interest rate
A shock that could trigger a recession is a
a. large military buildup
b. large increase in the price of oil
c. sudden unexplained increase in consumption
d. new technological breakthrough
e. large decrease in the price of oil
An individual’s quantity of money demanded
a. refers to how much money the individual would like to have
b. refers to the amount of money an individual needs to maintain her desired standard of
living
c. refers to her wealth constraint
d. refers to the amount of her wealth that an individual chooses to hold in the form of
money
e. is virtually unlimited
Gary buys a house for $200,000 using $10,000 of his own money and gets a mortgage
for the remaining $190,000. If the value of the house increases 7%, what will be the
percentage increase in Gary’s investment?
Which of the following most accurately describes the aggregate supply curve?
a. It shows the price level associated with firms’ unit costs and markups for any level of
GDP.
b. It is the sum of all individual firms’ supply curves.
c. It is determined by the federal government.
d. It shows firms’ unit costs for each level of GDP.
e. It shows the equilibrium level of GDP corresponding to each price level.
Most economists believe that the CPI
a. accurately measures the inflation rate
b. accurately measures the inflation rate except during years when there are major
economic shocks like the Arab oil embargo
c. slightly underestimates the inflation rate
d. seriously underestimates the inflation rate
e. overstates the inflation rate
During recessions, output
a. and unemployment both fall
b. and unemployment both rise
c. rises, but unemployment falls
d. falls, but unemployment rises
e. rises and unemployment remains constant.
A debt that rises faster than nominal GDP will impose the following opportunity costs
in the future:
a. A permanently higher tax burden.
b. A period of inflation.
c. Reduced government outlays relative to GDP
d. Higher taxes relative to GDP.
e. All of the above.
Wage differentials are due exclusively to differences in market structure.
The term that refers to the price level rising at a low rate is
a. hidden inflation
b. creeping inflation
c. repressed inflation
d. disinflation
e. deflation
A firm maximizes its profit by producing that quantity of output for which
Which panel in Figure 5-2 shows the effect of an increase in income, other things
constant?
If an excise tax is imposed on automobiles,
Which of the following is not true about the Consumer Price Index (CPI)?
a. The U.S. income tax system is indexed based on the CPI.
b. The majority of labor union contracts have wages indexed by the CPI.
c. The CPI can be used to transform nominal variables into real variables.
d. The CPI can be used to measure the inflation rate.
e. Social security benefits are indexed by the CPI.
Figure 5-7 shows Sally’s demand for movie theater tickets (quantity of movies per
year). At a price of $9 per ticket, the price elasticity of demand is
In which of the following situations would an individual experience an increase in real
wages?
a. Receiving a 5 percent increase in nominal wages while inflation was 6 percent
b. Taking a 3 percent cut in nominal wages while deflation was 4 percent
c. Taking a 1 percent cut in nominal wages while inflation was 1 percent
d. Receiving a 3 percent increase in nominal wages while inflation was 3 percent
e. Receiving no increase in nominal wages while inflation was 0 percent