Other things the same, if workers and firms expected inflation to be 2%, but it is only
1% then
a. employment and production rise.
b. employment rises and production falls.
c. employment falls and production rises.
d. employment and production fall.
Which of the following statements is correct?
a. Growth of productivity is the main determinant of growth in living standards.
b. Common knowledge and proprietary technology are both important for the
economy’s production of goods and services.
c. The terms capital and physical capital refer to the same thing.
d. All of the above are correct.
Which government entity computes U.S. GDP every three months?
a. the Council of Economic Advisers
b. the Department of Commerce
c. the Department of Treasury
d. the Federal Reserve
Who can vote on Federal Open Market Committee decisions?
a. all of the members of the Board of Governors and all of the Federal Reserve Bank
presidents
b. all of the members of the Board of Governors and some of the Federal Reserve Bank
presidents
c. some of the members of the Board of Governors and all of the Federal Reserve Bank
presidents
d. some of the members of the Board of Governors and some of the Federal Reserve
Bank presidents
When government policies are enacted,
a. equality can usually be enhanced without an efficiency loss, but efficiency can never
be enhanced without a reduction in equality.
b. efficiency can usually be enhanced without a reduction in equality, but equality can
never be enhanced without an efficiency loss.
c. it is always the case that either efficiency and equality are both enhanced, or
efficiency and equality are both diminished.
d. None of the above are correct.
Suppose government expenditures on goods and services increase, transfers are
unchanged, and taxes rise by less than the increase in expenditures. These changes in
the government’s budget cause
a. both the equilibrium interest rate and the equilibrium quantity of loanable funds to
fall.
b. both the equilibrium interest rate and the equilibrium quantity of loanable funds to
rise.
c. the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to
fall.
d. the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to
rise.
When the Sykes Corporation (an American company) buys shares of Audi stock (a
German company) for its pension fund, U.S. net capital outflow
a. increases because an American company makes a portfolio investment in Germany.
b. declines because an American company makes a portfolio investment in Germany.
c. increases because an American company makes a direct investment in Germany.
d. declines because an American company makes a direct investment in Germany.
You lose your job and, as a result, you buy fewer iTunes music downloads. This shows
that you consider iTunes music downloads to be a(n)
a. luxury good.
b. inferior good.
c. normal good.
d. complementary good.
Which of the following is the most accurate statement?
a. In the 1970s, the late 1980s, 1990s, and 2000s, the GDP deflator and the CPI both
showed high rates of inflation.
b. In the 1970s, both the GDP deflator and the consumer price index showed high rates
of inflation, and in the late 1980s, 1990s, and 2000s, both measures showed low rates of
inflation.
c. In the 1970s, both the GDP deflator and the consumer price index showed low rates
of inflation, and in the late 1980s, 1990s, and 2000s, both measures showed high rates
of inflation.
d. In the 1970s, the late 1980s, 1990s, and 2000s, the GDP deflator and the CPI both
showed low rates of inflation.
Senator Brown wants to increase taxes on people with high incomes and use the money
to help the poor. Senator Johnson argues that such a tax will discourage successful
people from working and will therefore make society worse off. An economist would
say that
a. we should agree with Senator Brown.
b. we should agree with Senator Johnson.
c. a good decision requires that we recognize both viewpoints.
d. there are no tradeoffs between equity and efficiency.
Most economists believe that classical macroeconomic theory is a good description of
the economy
a. in neither the short nor long run.
b. in the short run and in the long run.
c. in the short run, but not in the long run.
d. in the long run, but not in the short run.
Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because
people and households are less able to borrow, they spend less at any given price level
than they would otherwise. The crisis is persistent so lending should remain depressed
for some time.
RefertoFinancialCrisis.If nominal wages are sticky, which of the following helps
explains the change in output?
a. real wages fall, so firms choose to produce less
b. real wages fall, so firms choose to produce more
c. real wages rise, so firms choose to produce less
d. real wages rise, so firms choose to produce more
The idea that only the government can organize economic activity in a way that
promotes economic well-being for a country as a whole
a. is a basic principle regarding individual decisionmaking.
b. amounts to a denial of one of the basic principles regarding interactions among
people.
c. supports the idea that the “invisible hand” should guide economic activity.
d. was promoted by the economist Adam Smith in a well-known 1776 book.
When new goods are introduced, consumers have more variety from which to choose.
As a result, each dollar is worth
a. more, and the cost of living increases.
b. more, and the cost of living decreases.
c. less, and the cost of living increases.
d. less, and the cost of living decreases.
Suppose a country has a larger increase in debt in 2014 than it had in 2013. Then other
things the same,
a. the supply of loanable funds shifts rightward and the interest rate falls.
b. the supply of loanable funds shifts leftward and the interest rate rises.
c. the demand for loanable funds shifts leftward and the interest rate falls.
d. the demand for loanable funds shifts rightward and the interest rate rises.
According to classical macroeconomic theory, changes in the money supply change real
GDP but not the price level.
a. True
b. False
When the price of a good or service changes,
a. the supply curve shifts in the opposite direction.
b. the demand curve shifts in the opposite direction.
c. the demand curve shifts in the same direction.
d. there is a movement along a given demand curve.
The bowed shape of the production possibilities frontier can be explained by the fact
that
a. all resources are scarce.
b. economic growth is always occurring.
c. the opportunity cost of one good in terms of the other depends on how much of each
good the economy is producing.
d. the only way to get more of one good is to get less of the other.
Indexing the tax system to take into account the effects of inflation would by itself
a. mean that only real interest earnings are taxed.
b. mean an end to taxing capital gains.
c. mean an increase in average tax rates.
d. All of the above are correct.
According to the classical dichotomy, which of the following is influenced by monetary
factors?
a. real GDP
b. unemployment
c. nominal interest rates
d. All of the above are correct.
To diversify, a homeowner with a variable-rate mortgage should choose investments
that
a. pay higher returns when interest rates rise and lower returns when interest rates fall.
b. pay lower returns when interest rates rise and higher returns when interest rates fall.
c. provide a higher return than the market average.
d. provide a lower return than the market average.
Alpha Corporation has a price of $5 a share, outstanding shares of 2.5 million, retained
earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings
ratio which is
a. high, perhaps indicating that people expect future earnings to rise.
b. high, perhaps indicating that people expect future earnings to fall.
c. low, perhaps indicating that people expect future earnings to rise.
d. low, perhaps indicating that people expect future earnings to fall.
At which interest rate is the present value of $260.10 two years from today equal to
$250 today?
a. 2 percent
b. 3 percent
c. 4 percent
d. 5 percent
Economic models
a. are constructed to mirror reality as closely as possible, and in this respect economic
models are no different from other scientific models.
b. are constructed to mirror reality as closely as possible, and in this respect economic
models are very different from other scientific models.
c. are simplifications of reality, and in this respect economic models are no different
from other scientific models.
d. are simplifications of reality, and in this respect economic models are very different
from other scientific models.
The open-economy macroeconomic model includes
a. only the market for loanable funds.
b. only the market for foreign-currency exchange.
c. both the market for loanable funds and the market for foreign-currency exchange.
d. neither the market for loanable funds nor the market for foreign-currency exchange.
In most societies, resources are allocated by
a. a single central planner.
b. a small number of central planners.
c. those firms that use resources to provide goods and services.
d. the combined actions of millions of households and firms.
Over the last 140 years or so, on average Canada’s real GDP perperson grew faster than
that of the U.K.
a. True
b. False
Figure 27-6. On the graph, x represents risk and y represents return.
RefertoFigure27-6.Which of the following statements is correct?
a. At point A the standard deviation of the portfolio is 3.
b. A risk averse person always will choose to be at point A.
c. At point D the portfolio consists of about 15 percent stocks and 85 percent safe
assets.
d. The figure shows that the greater the risk, the greater the return.
The discount rate is
a. the rate at which public banks lend to other public banks.
b. the rate at which the Fed lends to banks.
c. the percentage difference between the face value of a Treasury bond and what the Fed
pays for it.
d. the percentage of deposits banks hold as excess reserves.
Which of the following is nota tool of monetary policy?
a. open market operations
b. reserve requirements
c. changing the discount rate
d. increasing the government budget deficit