Bananas and apples are substitutes. When the price of bananas rises, and a
technological advance in apple production occurs at the same time
A) the equilibrium price of apples rises and the equilibrium quantity of apples falls.
B) the equilibrium price of apples rises and the equilibrium quantity of apples rises.
C) the equilibrium price of apples rises and the equilibrium quantity of apples might
rise or fall.
D) the equilibrium quantity of apples rises and the equilibrium price of apples might
rise or fall.
Which of the following statements is true?
A) Free trade will benefit all workers in a nation equally.
B) As a result of specialization some workers will be displaced and hence, harmed by
free trade.
C) Free trade leads to lower wages for all workers in both nations.
D) Specialization will result in a decline in an industry and none of those workers will
be able to find other jobs.
Which of the following groups of countries are members of NAFTA?
A) Japan, Canada, and Mexico
B) The U.S.A., Japan, and Mexico
C) The U.S.A., France, and Germany
D) The U.S.A., Canada, and Mexico
For the purpose of statistically reporting the unemployment rate, “discouraged workers”
are
A) counted.
B) not counted.
C) offered other jobs.
D) trained to do different work.
According to Keynes, the level of employment is determined by:
A) technological progress.
B) interest rates.
C) price and wages.
D) the level of aggregate demand for goods and services.
The level of consumption that does not depend on income is called:
A) autonomous consumption.
B) the consumption function.
C) independent income.
D) the marginal propensity to consume.
The rate at which nations will exchange goods and services is known as the
A) exchange rate.
B) transfer rate.
C) terms of trade.
D) terms of exchange.
When the consumption function is expressed as C = Ca + b (1-t)y, taxes are collected
by the government as:
A) a constant proportion of income y.
B) an increasing proportion of income y.
C) a lump sum, and independent of y.
D) a decreasing proportion of income y.
Figure 14.3
Refer to Figure 14.3. At an interest rate of 10%, there is:
A) an excess demand for money of $300.
B) an excess supply of money of $500.
C) an excess supply of money of $300.
D) an excess demand for money of $500.
Figure 14.3
If the quantity of money demanded is greater than the quantity of money supplied, then
the interest rate will:
A) rise.
B) fall.
C) remain constant.
D) equal zero.
A U.S. company that wishes to sell more to other countries would favor
A) an appreciation of the dollar.
B) a depreciation of the dollar.
C) neither an appreciation nor a depreciation of the dollar.
D) higher interest rates.
The Fed can change the money supply by buying or selling long-term Treasury bonds.
Purchasing long-term securities is commonly called
A) open market operations.
B) discount operations.
C) federal funds speculation.
D) quantitative easing.
Which of the following statements about price indexes and the cost of living is correct?
A) As long as the overstatement of actual price increases remains below the
unemployment rate this measurement bias is mostly irrelevant.
B) Because the overstatement of actual price increases is always smaller than the
growth rate of real GDP this measurement bias is mostly irrelevant.
C) A one percent overstatement of actual price increases has a multi-billion impact in
Social Security budgets.
D) If the overstatement of actual price increases continues, the Social Security system is
likely to go bankrupt within the next five years.
If the long-run neutrality of money holds, then an increase in the money supply will
________ investment and output in the long run.
A) have no effect on
B) increase
C) decrease
D) increase or decrease
An open market ________ by the Fed decreases the money supply, which leads to
________ interest rates and a fall in investment spending.
A) sale; increased
B) sale; decreased
C) purchase; increased
D) purchase; decreased
In an economy with no government or foreign sector, the stock of capital depends on:
A) gross investment.
B) saving.
C) depreciation.
D) all of the above.
Which of the following causes autonomous consumption to decrease?
A) a decrease in consumer income
B) consumers becoming more thrifty
C) consumers becoming more optimistic about future decreases in the price level
D) an increase in average family size
Scenario 12.1: Jennifer has decided to give up her pack-a-day smoking habit and invest
the money she would have spent on cigarettes in a retirement account. At $6.00 a pack,
Jennifer is currently spending $2,190 per year on cigarettes. Jennifer is 25 years old and
plans to retire in 35 years, at age 60. She has chosen a retirement account that will earn
a long-term average return of 5 percent per year. Jennifer is currently earning $40,000
annually. Assume that the average annual inflation rate will be 5 percent per year, that
the cost of cigarettes will increase with inflation, and that Jennifer’s income will also
rise with the inflation rate.Refer to Scenario 12.1. Assume Jennifer gave up smoking for
only one year and invested that money ($2,190) at the 5 percent interest rate. How
much would the investment be worth in 35 years?
A) $2,300
B) $12,080
C) $32,445
D) $80,483
The slope of the production possibilities curve is
A) positive.
B) positive and increasing.
C) positive and decreasing.
D) the opportunity cost of one good in terms of the other.