Figure: The Demand and Supply of Wheat
Look at the figure The Demand and Supply of Wheat. What is the equilibrium price in
this wheat market?
A) $6
B) $4
C) $2
D) $8
Which of the following fiscal policies would make a budget surplus larger or a budget
deficit smaller?
A) an increase in government purchases of goods and services
B) lower government transfers
C) lower taxes
D) higher interest rates
Table: Per Capita GDP
Look at the table Per Capita GDP. The growth rate of real GDP from 2011 to 2014 was:
A) 10%.
B) 20%.
C) 25%.
D) 33%.
The table Fish and Coconut Production Possibilities shows the maximum amount of
fish or coconuts that Tom and Hank can produce when each produces only one of the
goods. The table implies that Tom has a comparative advantage in the production of
both goods.
A) True
B) False
The rule of 70 states that a variable’s approximate doubling time equals:
A) 70 times the growth rate.
B) the growth rate divided by 70.
C) 70 divided by the doubling time.
D) 70 divided by the growth rate.
The money multiplier is equal to:
A) 1 divided by the reserve ratio.
B) 1 divided by excess reserves.
C) 1 minus the reserve ratio.
D) the reserve ratio plus excess reserves divided by the reserve ratio.
Figure: The Market for Melons in Russia II
Look at the figure The Market for Melons in Russia II. If the world price is $10 and a
tariff of $5 is imposed on this market, the burden of the tariff will be borne by:
A) both producers and consumers.
B) consumers.
C) producers.
D) the government.
Consider a simple economy: MPC= 0.75, income = $400 billion, and aggregate
consumption spending = $400 billion. Autonomous consumption is:
A) 0.
B) $100 billion.
C) $300 billion.
D) $200 billion.
The banking crises of the 1930s resulted in a very large increase in the money supply,
which increased the severity of the Great Depression.
A) True
B) False
Prior to 1854, the United States was:
A) dominated by the manufacturing sector and was subject to price inflexibility.
B) dominated by the agricultural sector and was subject to price flexibility.
C) plagued by recurrent recessions due to poor government policy.
D) plagued by recurrent inflations due to poor central bank policy.
In looking at a chart of the positive relationship between police officers and crime, the
mayor remarks that more police officers cause more crime. The mayor may be wrong
because she did not consider:
A) the features of construction.
B) omitted variables.
C) reverse causality.
D) tangent lines.
Assume that Colombia gives up three motorcycles for each ton of coffee it produces,
while Bolivia gives up seven motorcycles for each ton of coffee it produces. Colombia
has a comparative advantage in _____ production and should specialize in _____.
A) motorcycle; coffee
B) coffee; motorcycles
C) coffee; coffee
D) motorcycle; motorcycles
Look at the scenario Assets and Liabilities of the Banking System. Suppose that the
reserve ratio is 10% and the Federal Reserve sells $11,000 worth of U.S. Treasury bills
to the banking system. If the banking system does NOT want to hold any excess
reserves, _____ will be _____ the money supply.
A) $110,000; added to
B) $110,000; subtracted from
C) $250,000; subtracted from
D) $250,000; added to
Other things equal, in the income”expenditure model, a decrease in the price level will
cause the planned aggregate expenditure curve to shift downward, resulting in a lower
level of real GDP.
A) True
B) False
European automakers moved to the United States in the 1990s and early 2000s:
A) to take advantage of the low cost of health care for autoworkers.
B) because the euro had appreciated.
C) because the dollar had appreciated.
D) to use plants that U.S. auto manufacturers had abandoned.
Last month Brent lost his job at the auto parts factory because the factory relocated to
Asia. Brent and his former coworkers have been looking for similar jobs, but they have
found no openings. In Brent’s town the _____ labor has _____.
A) supply of; fallen
B) supply of; risen
C) demand for; risen
D) demand for; fallen
Generally bonds are considered to be riskier than stocks.
A) True
B) False
The national banking era was the period:
A) between when the Federal Reserve was formed in 1913 and the Great Depression in
1929.
B) in which the fewest banking crises occurred in the United States.
C) when shadow banking became an important part of the financial sector of the
economy.
D) after the Civil War and before the Federal Reserve was established in 1913.
Inability to use monetary policy because the nominal rate of interest cannot fall below
zero is called:
A) liquidity preference.
B) money neutrality.
C) the liquidity trap.
D) money illusion.
Figure: Technological Progress and Productivity Growth
Look at the figure
Technological Progress and Productivity Growth. Which of the following changes in
real GDP is most likely to have resulted from an increase in foreign investment
spending?
A) A to B
B) B to C
C) B to A
D) both A to B and B to C
Figure: The Multiplier
Look at the figure The Multiplier. If this economy is at Y1 and the price level decreases:
A) AD1 will shift to the left, reflecting a multiplied decrease in real GDP at every price
level.
B) AD1 will shift to the right, reflecting a multiplied increase in real GDP at every price
level.
C) an upward movement along the AD1 will take place, reflecting an increase in the
price level.
D) a downward movement along the AD1 will take place, reflecting a decrease in the
price level.
Some economists believe that fluctuations in the growth rate of total factor productivity
cause business cycles.
A) True
B) False
Savings and loans accept long-term savings deposits and use them to fund short-term
loans to businesses.
A) True
B) False
Table: Price and Output Data
Look at the table Price and Output Data.
The value of year 2’s output in real dollars is:
A) $4.
B) $12.
C) $15.
D) $16.
Figure: Shifts in Demand and Supply III
Look at the figure Shifts in Demand and Supply III. The figure shows how supply and
demand might shift in response to specific events. Suppose a wet and sunny year
increases the nation’s corn crop by 20 percent. Which panel BEST describes how this
will affect the market for corn?
A) panel A
B) panel B
C) panel C
D) panel D
Figure: Shifts in Demand and Supply IV
Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and
demand might shift in response to specific events. Suppose consumer incomes increase.
Which panel BEST describes how this will affect the market for big-screen televisions,
a normal good?
A) panel A
B) panel B
C) panel C
D) panel D
Which of the following is sold in the factor market?
A) hamburgers
B) video games
C) haircuts
D) labor
A $50 million increase in investment spending will eventually cause equilibrium real
GDP to:
A) decrease by $50 million.
B) increase by $50 million.
C) increase by more than $50 million.
D) increase by less than $50 million.
If the demand for money is $300 billion and the supply of money is $200 billion, then
the interest rate will:
A) fall.
B) rise.
C) remain unchanged.
D) be in equilibrium.
Consider the supply curve for cotton shirts. An increase in the price of cotton will:
A) increase the supply of cotton shirts.
B) decrease the supply of cotton shirts.
C) increase the quantity supplied of cotton shirts.
D) decrease the demand for cotton shirts.
The Federal Reserve affects interest rates by:
A) setting them with regulations.
B) open market operations that shift the money demand curve.
C) open market operations that shift the money supply curve.
D) changing tax rates.
The General Theory of Employment, Interest, and Money, written by _____ and
published in _____, transformed the way economists thought about macroeconomics.
A) Milton Friedman; 1946
B) Paul Samuelson; 1940
C) John Maynard Keynes; 1936
D) Paul Lucas; 1966
In the long run a change in the money supply will affect:
I. the interest rate.
II. real GDP.
III. prices.
A) I only
B) II only
C) III only
D) I, II, and III
Figure: The Aggregate Consumption Function and Planned Aggregate Spending
Look at the table The Aggregate Consumption Function and Planned Aggregate
Spending. If currentdisposable income increases in this economy, then the:
A) aggregate expenditures curve will shift up.
B) aggregate expenditures curve will shift down.
C) economy will move upward along the aggregate expenditures curve.
D) economy will move downward along the aggregate expenditures curve.