GDP is defined as the
a. value of all goods and services produced within a country in a given period of time.
b. value of all goods and services produced by the citizens of a country, regardless of
where they are living, in a given period of time.
c. value of all final goods and services produced within a country in a given period of
time.
d. value of all final goods and services produced by the citizens of a country, regardless
of where they are living, in a given period of time.
Other things the same, the aggregate quantity of goods demanded in the U.S. increases
if
a. real wealth falls.
b. the interest rate rises.
c. the dollar depreciates.
d. None of the above is correct.
A program to reduce inflation is likely to have lower costs if the sacrifice ratio is
a. high and the reduction is unexpected.
b. high and the reduction is expected.
c. low and the reduction is unexpected.
d. low and the reduction is expected.
Goods produced abroad and sold domestically are called exports and goods produced
domestically and sold abroad are called imports.
a. True
b. False
Which of the following is consistent with the catch-up effect?
a. The United States had a higher growth rate before 1900 than after.
b. After World War II the United States had lower growth rates than war-ravaged
European countries.
c. Although the United States has a relatively high level of output per person, its growth
rate is rather modest compared to some countries.
d. All of the above are correct.
If people eventually adjust their inflation expectations so that in the long run actual and
expected inflation are the same, then policymakers
a. can not exploit a tradeoff between inflation and unemployment in either the short or
long run.
b. can exploit a tradeoff between inflation and unemployment in the short run but not in
the long run.
c. can exploit a tradeoff between inflation and unemployment in both the short run and
the long run.
d. can exploit a tradeoff between inflation and unemployment in the long run, but not
the short run.
If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will
want to hold
a. fewer reserves, so the money multiplier will fall.
b. fewer reserves, so the money multiplier will rise.
c. more reserves, so the money multiplier will fall.
d. more reserves, so the money multiplier will rise.
The effect of a change in the value of the dollar in the foreign exchange market due to a
change in the price level helps explain the slope of aggregate demand, but does not shift
it. The effects of a change in the value of the dollar in the foreign exchange market due
to speculation is shown by shifting the aggregate demand curve.
a. True
b. False
RefertoFigure2-9,Panel(a).The movement from point M to point K could be caused by
a. an advance in production technology.
b. an improvement in efficiency.
c. economic growth.
d. unemployment.
Table 3-35
RefertoTable3-35.
Denmark’s opportunity cost of producing 1dozen eggs is
a. 5/4 pounds of ham. This is higher than Finland’s opportunity cost of producing
1dozen eggs.
b. 5/4 pounds of ham. This is lower than Finland’s opportunity cost of producing 1
dozen eggs.
c. 4/5 pounds of ham. This is higher than Finland’s opportunity cost of producing 1
dozen eggs.
d. 4/5 pounds of ham. This is lower than Finland’s opportunity cost of producing 1
dozen eggs.
In 1898, prospectors on the Klondike River discovered gold. This discovery caused an
unexpected price level
a. decrease that benefited creditors at the expense of debtors.
b. decrease that benefited debtors at the expense of creditors.
c. increase that benefited creditors at the expense of debtors.
d. increase that benefited debtors at the expense of creditors.
Table 29-4.
RefetoTable29-4. The reserve ratio for this bank is
a. 8 percent.
b. 12.5 percent.
c. 87.5 percent.
d. 25 percent.
Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which
country’s exports increase?
a. Spain’s
b. the U.S.’s
c. Spain’s and the U.S.’s
d. neither Spain’s nor the U.S.’s
Other things the same, continued increases in the money supply lead to
a. continued increases in the price level and real GDP.
b. continued increases in the price level but not continued increases in real GDP.
c. continued increases in real GDP but not continued increases in the price level.
d. a one-time permanent increase in both prices and real GDP.
Which of the following results if the U.S. removes an import quota on computer
components?
a. U.S. exports and U.S. imports both increase
b. U.S. exports increase but U.S. imports are unchanged
c. U.S. imports increase but U.S. exports are unchanged
d. None of the above are correct
Figure 3-6
Refer to Figure3-6. If the production possibilities frontier shown for Maxine is for 3
hours of work, then how long does it take Maxine to make one pie?
a. 1/4 hour
b. 1/3 hour
c. 3 hours
d. 4 hours
One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is
sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who
sells it to a consumer for $2.00. Taking these four transactions into account, what is the
effect on GDP?
a. GDP increases by $3.00.
b. GDP increases by $5.00.
c. GDP increases by $6.00.
d. GDP increases by $7.00.
An adverse supply shock will cause output
a. and prices to rise.
b. and prices to fall.
c. to rise and prices to fall.
d. to fall and prices to rise.
Many economists believe the bias in the CPI is now only about half as large as it once
was.
a. True
b. False
Figure 33-10.
RefertoFigure33-10. If the economy starts at point C, stagflation would be consistent
with point
a. A.
b. B.
c. C.
d. D.
Economist Robert Fogel focused on which of the following factors as one determinant
of long-run economic growth?
a. education
b. research and development
c. nutrition
d. trade restrictions
Risk-averse individuals like good things more than they dislike comparable bad things.
a. True
b. False
In the open-economy macroeconomic model, the supply of loanable funds comes from
a. national saving. Demand comes from only domestic investment.
b. national saving. Demand comes from domestic investment and net capital outflow.
c. Only net capital outflow. Demand for loanable funds comes from national saving.
d. domestic investment and net capital outflow. Demand for loanable funds comes from
national saving.
If in some year real GDP was $5 trillion and the GDP deflator was 200, what was
nominal GDP?
a. $2.5 trillion.
b. $10 trillion.
c. $40 trillion.
d. $100 trillion.
A mutual fund
a. is a financial institution that stands between savers and borrowers.
b. is a financial intermediary.
c. allows people with small amounts of money to diversify their holdings.
d. All of the above are correct.
Quality Motors is a Japanese-owned company that produces automobiles; all of its
automobiles are produced in American plants. In 2008, Quality Motors produced $25
million worth of automobiles and sold $12 million in the U.S. and $13 million in
Mexico. In addition, it sold $2 million from the previous year’s inventory in the U.S.
The transactions just described contribute how much to U.S. GDP for 2008?
a. $12 million
b. $14 million
c. $25 million
d. $27 million
In the short run, policy that changes aggregate demand changes
a. both unemployment and the price level.
b. neither unemployment nor the price level.
c. only unemployment.
d. only the price level.
For a self-sufficient producer, the production possibilities frontier
a. is the same as the consumption possibilities frontier.
b. is greater than the consumption possibilities frontier.
c. is less than the consumption possibilities frontier.
d. is always a straight line.
Elizabeth just received her Ph.D. in economics and has two competing job offers. The
first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in
Austin, TX that pays $90,000. Which pair of CPIs would make the two salaries have the
same purchasing power?
a. 70 in Washington, D.C. and 42 in Austin, TX
b. 140 in Washington, D.C. and 70 in Austin, TX
c. 160 in Washington, D.C. and 72 in Austin, TX
d. 210 in Washington, D.C. and 150 in Austin, TX
Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A
year later, after Rosa has accumulated $20 in interest, she withdraws her $120. Rosa’s
purchasing power
a. did not change if the inflation rate was 20 percent.
b. decreased if the inflation rate was -5 percent.
c. increased if the inflation rate was 22 percent.
d. More than one of the above is correct.
The law of supply states that, other things equal, an increase in
a. price causes quantity supplied to increase.
b. price causes quantity supplied to decrease.
c. quantity supplied causes price to increase.
d. quantity supplied causes price to decrease.