Other things the same,as the price level falls, which of the following increases?
a. lending and investment spending
b. lending, but not investment spending
c. investment spending, but not lending
d. neither investment spending nor lending
If there are diminishing returns to capital, then
a. capital produces fewer goods as it ages.
b. old ideas are not as useful as new ones.
c. increases in the capital stock eventually decrease output.
d. increases in the capital stock increase output by ever smaller amounts.
If the Federal Reserve increases the money supply, then initially there is a
a. shortage in the money market, so people will want to sell bonds.
b. shortage in the money market, so people will want to buy bonds.
c. surplus in the money market, so people will want to sell bonds.
d. surplus in the money market, so people will want to buy bonds.
Purchasing-power parity theory does not hold at all times because
a. many goods are not easily transported.
b. the same goods produced in different countries may be imperfect substitutes for each
other.
c. Both a and b are correct.
d. prices are different across countries.
Which of the following tends to make the size of a shift in aggregate demand resulting
from an increase in government purchases smaller than it otherwise would be?
a. the multiplier effect
b. the crowding-out effect
c. the accelerator effect
d. All of the above are correct.
Consider the following three items of spending by the government: (i) the federal
government pays a $500 unemployment benefit to an unemployed person; (ii) the
federal government makes a $2,000 salary payment to a Navy lieutenant; (iii) the city of
Bozeman, Montana makes a $10,000 payment to ABC Lighting Company for street
lights in Bozeman. Which of these payments contributes directly to government
purchases in the national income accounts?
a. only item (i)
b. only item (ii)
c. only items (i) and (ii)
d. only items (ii) and (iii)
David’s Utility Function
If David’s current wealth is $61,000, then
a. his gain in utility from gaining $1,000 is less than his loss in utility from losing
$1,000. David is risk averse.
b. his gain in utility from gaining $1,000 is less than his loss in utility from losing
$1,000. David is not risk averse.
c. his gain in utility from gaining $1,000 is greater than his loss in utility from losing
$1,000. David is risk averse.
d. his gain in utility from gaining $1,000 is greater than his loss in utility from losing
$1,000. David is not risk averse.
In the open-economy macroeconomic model, if the supply of loanable funds increases,
then the interest rate
a. and the real exchange rate increase.
b. and the real exchange rate decrease.
c. increases and the real exchange rate decreases.
d. decreases and the real exchange rate increases.
If asset markets are driven by the “animal spirits” of investors, then
a. those markets reflect rational behavior.
b. those markets reflect irrational behavior.
c. the efficient markets hypothesis is correct.
d. the stock market exhibits informational efficiency.
Most economists believe that monetary neutrality provides
a. a good description of both the long run and the short run.
b. a good description of neither the long run nor the short run.
c. a good description of the short run, but not the long run.
d. a good description of the long run, but not the short run.
Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of
improved international relations and increased confidence in policy makers, people
become more optimistic about the future and stay this way for some time.
RefertoOptimism.In the short run what happens to the price level and real GDP?
a. both the price level and real GDP rise.
b. both the price level and real GDP fall.
c. the price level rises and real GDP falls.
d. the price level falls and real GDP rises.
Policies such as rent control and trade barriers persist in spite of the fact that economists
are virtually united in their opposition to such policies, probably because
a. economists have not yet convinced the general public that the policies are
undesirable.
b. economists engage in positive analysis, not normative analysis.
c. economists have values that are different from the values of most non-economists.
d. economists’ theories are not easily confirmed or refuted in laboratory analysis.
Which of the following statements regarding the Federal Open Market Committee is
correct?
a. Only the five voting regional Fed presidents attend the meetings.
b. All regional Fed presidents attend and vote at the meetings.
c. All regional Fed presidents attend the meetings, but only five get to vote.
d. Regional Fed presidents may neither attend nor vote the meetings.
Which of the following is included in GDP?
a. the market value of rental housing services, but not the market value of
owner-occupied housing services.
b. the market value of owner-occupied housing services, but not the market value of
rental housing services
c. both the market value of rental housing services and the market value of
owner-occupied housing services
d. neither the market value of owner-occupied housing services nor the market value of
rental housing services.
Which of the following best illustrates the unit of account function of money?
a. You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.
b. You pay for your theater tickets with dollars.
c. You hold currency even though you don”t intend to spend it right away.
d. None of the above is correct.
Which of the following is the most correct statement about the relationship between
inflation and unemployment?
a. In the short run, falling inflation is associated with falling unemployment.
b. In the short run, falling inflation is associated with rising unemployment.
c. In the long run, falling inflation is associated with falling unemployment.
d. In the long run, falling inflation is associated with rising unemployment.
Figure 4-4
RefertoFigure4-4.Suppose Yasmine and Mercedes are the only two consumers in the
market. When the market price falls from $12 to $6, the quantity demanded increases
by
a. 6 units.
b. 9 units.
c. 12 units.
d. 15 units.
Table24-13.Olivia’s expenditures on clothing for three consecutive years, along with
some values for the CPI, are presented in the table below.
RefertoTable24-13.Suppose Olivia’s 2009 clothing expenditure in 2010 dollars
amounts to $1,440. Then X, the consumer price index for 2009, has a value of
a. 120.
b. 130.
c. 140.
d. 150.
Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the
price index at 177, the $5 a day is worth $88.50.
a. True
b. False
Today, bank runs are
a. uncommon because of the high reserve requirement.
b. uncommon because of FDIC deposit insurance.
c. common because of the low reserve requirement.
d. common because the FDIC is nearly bankrupt.
Compared to stocks, bonds offer the holder
a. lower risk and lower potential return.
b. lower risk and higher potential return.
c. higher risk and lower potential return.
d. higher risk and higher potential return.
In a competitive market, each seller has limited control over the price of his product
because
a. other sellers are offering similar products.
b. buyers exert more control over the price than do sellers.
c. these markets are highly regulated by the government.
d. sellers usually agree to set a common price that will allow each seller to earn a
comfortable profit.
Other things the same an increase in the interest rate
a. increases national saving, this is shown by moving along the demand for loanable
funds curve.
b. increases national saving, this is shown by moving along the supply of loanable
funds curve.
c. decreases national saving, this is shown by moving along the demand for loanable
funds curve.
d. decreases national saving, this is shown by moving along the supply of loanable
funds curve.
A German mutual fund sells euros to a U.S. bank for $20,000. The mutual fund then
uses these dollars to purchase a bond issued by United Express, a U.S. delivery
company. As a result of these two transactions, what happened to U.S. net capital
outflow?
a. It fell by $40,000.
b. It fell by $20,000.
c. It was unchanged.
d. It rose by $20,000.
When a country imposes a trade restriction, the real exchange rate of that country’s
currency appreciates.
a. True
b. False
You receive $500 today which you plan to save for two years. Also, in two years you
will be given another $500. If the interest rate is 5 percent, what is the present value of
the payment of $500 today and the $500 in two years?
a. $500(1.05)2 + $500/(1.05)2
b. $500(1.05)2 + $500
c. $500 + $500/(1.05)2
d. $500 + $500
Suppose there is a decrease in the price of corn. If corn is an input into the production
of ethanol, we would expect the supply curve for ethanol to
a. shift rightward.
b. shift leftward.
c. become flatter.
d. remain unchanged.
The destruction of manufacturing jobs and workers leaving their jobs to find better ones
both contribute to structural unemployment.
a. True
b. False
Suppose businesses in general believe that the economy is likely to head into recession
and so they reduce capital purchases. Their reaction would initially shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both
U.S. net exports and U.S. net capital outflow decrease.
a. True
b. False
The information below for 2008 in millions was reported by the World Bank. On the
basis of this information, which list below contains the correct ordering of GDP per
person from highest to lowest?
a. Ghana, Kenya, Tanzania
b. Ghana, Tanzania, Kenya
c. Kenya, Tanzania, Ghana
d. Kenya, Ghana, Tanzania
Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then
a. the demand for loanable funds would shift rightward, initially creating a surplus of
loanable funds at the original interest rate.
b. the demand for loanable funds would shift rightward, initially creating a shortage of
loanable funds at the original interest rate.
c. the supply of loanable funds would shift rightward, initially creating a surplus of
loanable funds at the original interest rate.
d. the supply of loanable funds would shift rightward, initially creating a shortage of
loanable funds at the original interest rate.
You wear either shorts or sweatpants every day. You notice that sweatpants have gone
on sale, so your demand for
a. sweatpants will increase.
b. sweatpants will decrease.
c. shorts will increase.
d. shorts will decrease.
Which of the following is an example of a produced factor of production?
a. a plant in which automobiles are assembled
b. skills that people accumulate in high school and college
c. skills that people accumulate through experience in the workplace
d. All of the above are correct.
Which of the following is notincluded in aggregate demand?
a. purchases of stock and bonds
b. purchases of services such as visits to the doctor
c. purchases of capital goods such as equipment in a factory
d. purchases by foreigners of consumer goods produced in the United States