Economists devise theories, collect data, and then analyze these data in an attempt to
verify or refute their theories.
a. True
b. False
Suppose that the central bank is required to follow a monetary policy rule to stabilize
prices. If the economy starts at long-run equilibrium and then aggregate supply shifts
right, the central bank would have to
a. increase the money supply, which causes output to move closer to its long-run
equilibrium.
b. increase the money supply, which causes output to move farther from long-run
equilibrium.
c. decrease the money supply, which causes output to move closer to its long-run
equilibrium.
d. decrease the money supply, which causes output to move farther from long-run
equilibrium.
In order to include many different goods and services in an aggregate measure, GDP is
computed using, primarily,
a. values of goods and services based on surveys of consumers.
b. market prices.
c. quantities purchased by a typical urban household.
d. profits from producing goods and services.
Owners of municipal bonds
a. are not required to pay federal income tax on the interest income.
b. usually receive a higher interest rate compared to bonds issued by corporations.
c. usually receive a higher interest rate compared to stock issued by corporations.
d. pay taxes on the dividends earned from these bonds.
To be counted as “employed” in the U.S. labor force statistics, a person
a. must be working for pay and be working full time.
b. must be working for pay but does not have to be working full time.
c. does not have to be working for pay if they are working for a family business but
must be employed full time.
d. does not have to be working for pay if they are working for a family business and
does not have to be working full time
If people who report being unemployed are not, in fact, trying hard to find a job, then
the reported unemployment rate will be biased upward.
a. True
b. False
All explanations for the upward slope of the short-run aggregate supply curve suppose
that the quantity of output supplied increases when the actual price level exceeds the
expected price level.
a. True
b. False
If an economy’s GDP falls, then it must be the case that the economy’s
a. income and saving fall.
b. income and market value of all production both fall.
c. income falls and market value of all production rises.
d. income rises and market value of all production falls.
If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs
400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami
sells for $55 dollars, then
a. the real exchange rate is greater than one and arbitrageurs could profit by buying
oranges in the U.S. and selling them in Morocco.
b. the real exchange rate is greater than one and arbitrageurs could profit by buying
oranges in Morocco and selling them in the U.S.
c. the real exchange rate is less than one and arbitrageurs could profit by buying
oranges in the U.S. and selling them in Morocco.
d. the real exchange rate is less than one and arbitrageurs could profit by buying
oranges in Morocco and selling them in the U.S.
If an externality is present in a market, economic efficiency may be enhanced by
a. government intervention.
b. a decrease in foreign competition.
c. fewer market participants.
d. weaker property rights.
Figure34-4.On the figure, MSrepresents money supply and MDrepresents money
demand.
RefertoFigure34-4. Which of the following events could explain a decrease in the
equilibrium interest rate from 1to 3?
a. a decrease in the price level
b. a decrease in the number of firms building new factories and buying new equipment
c. an increase in the price level
d. an increase in the number of firms building new factories and buying new equipment
Suppose that Amanda receives a pay increase. We would expect
a. to observe Amanda moving down and to the right along her given demand curve.
b. Amanda’s demand for inferior goods to decrease.
c. Amanda’s demand for each of two goods that are complements to increase.
d. Amanda’s demand for normal goods to decrease.
Over time both real GDP and the price level have trended upward. Which of these
trends would the classical dichotomy say could be explained by an upward trend in the
money supply?
a. both the upward trend in real GDP and the upward trend in the price level
b. the upward trend in real GDP but not the upward trend in the price level
c. the upward trend in the price level but not the upward trend in real GDP
d. neither the upward trend in the price level nor the upward trend in real GDP
The idea that inflation by itself reduces people’s purchasing power is called
a. the inflation tax.
b. menu costs.
c. the inflation fallacy.
d. shoeleather costs.
One difference between a hypothetical benevolent king implementing the best policy
and the president implementing the best policy in the real world is the president has to
be concerned about
a. any misunderstandings in communicating the policy to the public.
b. whether the policy will affect his standing among different groups in the electorate.
c. what amendments will be suggested by members of Congress.
d. All of the above are correct.
Figure 33-1.
RefertoFigure33-1. Line A is
a. investment spending.
b. real GDP.
c. unemployment rate.
d. CPI.
When the Fed buys bonds
a. the supply of money increases and so aggregate demand shifts right.
b. the supply of money decreases and so aggregate demand shifts left.
c. the supply of money decreases and so aggregate demand shifts right.
d. the supply of money increases and so aggregate demand shifts left.
Table 3-39
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
RefertoTable3-39.Japan should specialize in the production of
a. cars and import airplanes.
b. airplanes and import cars.
c. both goods and import neither good.
d. neither good and import both goods.
The use of the coordinate system allows
a. for the display of the flows of dollars, goods and services, and factors of production
in an economic system.
b. for the display of how labor and other resources are organized in the production
process.
c. for the display of two variables on a single graph.
d. for the creation of pie charts and bar graphs.
A table that shows the relationship between the price of a good and the quantity
demanded of that good is called a
a. price-quantity schedule.
b. buyer schedule.
c. demand schedule.
d. demand curve.
Suppose that some country had an adult population of about 50 million, a labor-force
participation rate of 60 percent, and an unemployment rate of 5 percent. How many
people were employed?
a. 1.5 million
b. 28.5 million
c. 30 million
d. 47.5 million
Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
Refer to Table3-20. Assume that Brad and Theresa each has 60 minutes available. If
each person spends all his or her time producing the good in which he or she has a
comparative advantage, then total production is
a. 6 bushels of wheat and 6 pounds of beef.
b. 10 bushels of wheat and 5 pounds of beef.
c. 10 bushels of wheat and 6 pounds of beef.
d. 6 bushels of wheat and 5 pounds of beef.
Which of the following statements best represents the principle represented by the
adage, “There is no such thing as a free lunch”?
a. Michelle can attend the concert only if she takes her sister with her.
b. Michael is hungry and homeless.
c. Andrea must repair the tire on her bike before she can ride it to class.
d. Dani must decide between going to Florida or Brazil for spring break.
Net capital outflow equals the difference between a country’s
a. income and expenditure.
b. investment and saving.
c. purchases of foreign goods and services and sales of goods and services abroad.
d. purchases of foreign assets and sales of domestic assets abroad.
The irrelevance of monetary changes for real variables is called monetary neutrality.
Most economists accept monetary neutrality as a good description of the economy in
the long run, but not the short run.
a. True
b. False
A forest is an example of a nonrenewable resource.
a. True
b. False
Figure 4-18
RefertoFigure4-18. At a price of $35, there would be
a. a shortage, and the price would tend to rise from $35 to a higher price.
b. a surplus, and the price would tend to rise from $35 to a higher price.
c. excess demand, and the price would tend to fall from $35 to a lower price.
d. excess supply, and the price would tend to fall from $35 to a lower price.
If the government were to intervene and set a wage for unskilled labor above the market
wage, then we would expect, relative to the market outcome,
a. an increase in the number of unskilled jobs available.
b. a decrease in the number of unskilled jobs available.
c. a decrease in the number of workers wanting unskilled jobs.
d. None of the above is correct.
Net capital outflow equals the purchase of
a. foreign assets by domestic residents.
b. domestic assets by foreign residents.
c. domestic assets by foreign residents – the purchase of foreign assets by domestic
residents
d. foreign assets by domestic residents – the purchase of domestic assets by foreign
residents
In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on
the grounds that
a. it seemed to work for wages but not for inflation.
b. monetary policy was ineffective in combating inflation.
c. the Phillips curve did not apply in the long run.
d. Phillips had made errors in collecting his data.
In the market for loanable funds, the interaction of the demand for, and supply of,
loanable funds determines the equilibrium level of
a. the inflation rate.
b. gross domestic product.
c. the real interest rate.
d. the nominal interest rate.
You put $75 in the bank one year ago and forgot about it. The bank sends you a notice
that you now have $81 in your account. What interest rate did you earn?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent