If total spending rises from one year to the next, then which of the following could
notbe true?
a. the economy is producing a smaller output of goods and services, and goods and
services are selling at higher prices.
b. the economy is producing a larger output of goods and services, and goods and
services are selling at lower prices.
c. the economy is producing a larger output of goods and services, and goods and
services are selling at higher prices.
d. the economy is producing a smaller output of goods and services, and goods and
services are selling at lower prices.
Minimum-wage laws
a. create unemployment.
b. do not apply in states with right-to-work laws.
c. affect highly-educated workers more than high school dropouts.
d. cause labor shortages, which further raise wages above equilibrium.
Which of the following is considered part of the supply of U.S. dollars in the market for
foreign-currency exchange in the open-economy macroeconomic model?
a. both a U.S. bank wanting to lend money to a Canadian company and a U.S. firm
wanting to buy computers made in South Korea
b. a U.S. bank wanting to lend money to a Canadian company, but not a U.S. firm
wanting to buy computers made in South Korea
c. a U.S. firm wanting to buy computers made in South Korea, but not a U.S.bank
wanting to lend money to a Canadian company
d. neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm
wanting to buy computers made in South Korea
Which of the following is true of stimulus policy enacted in 2009?
a. We can be sure that it reduced the severity of the recession because the recession was
less severe than the Great Depression.
b. We can be sure that it reduced the severity of the recession even though the recession
was more severe than the Great Depression.
c. We can not be sure that it reduced the severity of the recession, but the recession was
less severe than the Great Depression.
d. We can not be sure that it reduced the severity of the recession because the recession
was more severe than the Great Depression.
The purchase of U.S. government bonds by Egyptians is an example of
a. U.S. imports.
b. U.S. exports.
c. foreign portfolio investment by Egyptians.
d. foreign direct investment by Egyptians.
If the discount rate is lowered, banks borrow
a. less from the Fed so reserves increase.
b. less from the Fed so reserves decrease.
c. more from the Fed so reserves increase.
d. more from the Fed so reserves decrease.
An increase in a country’s saving rate permanently raises its productivity.
a. True
b. False
The long-run aggregate supply curve would shift right if the government were to
a. reduce the minimum-wage.
b. make unemployment benefits more generous.
c. raise taxes on investment spending.
d. All of the above are correct.
In the circular-flow diagram, which of the following items flows from firms to
households through the markets for the factors of production?
a. goods and services
b. land, labor, and capital
c. dollars spent on goods and services
d. wages, rent, and profit
The natural rate of unemployment
(i) is the economy’s desirable level of unemployment.
(ii) cannot be affected by economic policy.
(iii) is typically constant over time.
a. (i) and (ii) only
b. (iii) only
c. (i), (ii), and (iii)
d. None of the above is correct.
Total income from the domestic production of final goods and services equals
a. only household expenditures for these goods.
b. only household and business expenditures for these goods.
c. only household and government expenditures for these goods.
d. the expenditures for these goods whoever buys them.
Generally, if people begin to expect a company to have higher future profits, the price
of the company’s stock will begin to decrease.
a. True
b. False
Both Dave and Caroline produce sweaters and socks. If Dave’s opportunity cost of 1
sweater is 3 socks and Caroline’s opportunity cost of 1 sweater is 5 socks, then
a. Dave has a comparative advantage in the production of sweaters.
b. Caroline has a comparative advantage in the production of sweaters.
c. Dave has a comparative advantage in the production of socks.
d. Dave has a comparative advantage in the production of both sweaters and socks.
In response to recession, who primarily cut taxes rather than raised expenditures?
a. President George W. Bush and President Barack Obama
b. President George W. Bush but not President Barack Obama
c. President Barack Obama but not President George W. Bush
d. neither President George W. Bush nor President Barack Obama
If Canada goes from a large budget deficit to a small budget deficit, it will
a. increase private saving and so shift the supply of loanable funds right.
b. increase investment and so shift the demand for loanable funds right.
c. increase public saving and so shift the supply of loanable funds right.
d. reduce national saving and shift the supply left.
The demand curve for coffee shifts
a. only when income changes.
b. when a determinant of the demand for coffee other than the price of coffee changes.
c. when the price of coffee changes.
d. Both b and c are correct.
In which of the following cases was the inflation rate 12 percent over the last year?
a. One year ago the price index had a value of 110 and now it has a value of 120.
b. One year ago the price index had a value of 120 and now it has a value of 132.
c. One year ago the price index had a value of 134 and now it has a value of 150.
d. One year ago the price index had a value of 145 and now it has a value of 163.
Table 23-3
The table below contains data for the country of Crete for the year 2010.
RefertoTable23-3.What were Crete’s net exports in 2010?
a. -$217
b. -$88
c. $88
d. $217
Figure 4-24
The diagram below pertains to the demand for turkey in the United States.
RefertoFigure4-24.All else equal, buyers expecting turkey to be more expensive in the
future would cause a current move from
a. DAto DB.
b. DBto DA.
c. x to y.
d. y to x.
The overall effect of accounting for purchases of foreign goods in GDP reduces GDP.
a. True
b. False
Paper dollars
a. are commodity money and gold coins are fiat money.
b. are fiat money and gold coins are commodity money.
c. and gold coins are both commodity monies.
d. and gold coins are both fiat monies.
When Americans invest in Russia, the income of Russians (that is, Russian GNP) rises
by more than production in Russia (that is, Russian GDP).
a. True
b. False
Most U.S. workers have wages well above the legal minimum, so minimum-wage laws
do not prevent the wage from adjusting to balance supply and demand.
a. True
b. False
According to the aggregate demand and aggregate supply model, in the long run a
decrease in the money supply leads to
a. decreases in both the price level and real GDP.
b. an increase in real GDP and an increase in the price level.
c. a decrease in the price level but does not change real GDP.
d. an increase in the price level but does not change real GDP.
Currently you purchase ten frozen pizza per month. You will graduate from college in
December, and you will start a new job in January. You have no plans to purchase
frozen pizzas in January. For you, frozen pizzas are a(n)
a. substitute good.
b. normal good.
c. inferior good.
d. complementary good.
Which of the following events would cause a movement upward and to the left along
the demand curve for olives?
a. The number of people who purchase olives decreases.
b. Consumer income decreases, and olives are a normal good.
c. The price of pickles decreases, and pickles are a substitute for olives.
d. The price of olives rises.
The misery index is supposed to measure the
a. social cost of unemployment.
b. health of the economy.
c. lost output associated with a particular unemployment rate.
d. short-run tradeoff between inflation and unemployment.
Suppose the MPCis 0.9. There are no crowding out or investment accelerator effects. If
the government increases its expenditures by $30 billion, then by how much does
aggregate demand shift to the right? If the government decreases taxes by $30 billion,
then by how far does aggregate demand shift to the right?
a. $283 billion and $254.7 billion
b. $283 billion and $283 billion
c. $300 billion and $270 billion
d. $300 billion and $300 billion
Assuming the interest rate is 6 percent, which of the following has the greatest present
value?
a. $300 paid in two years
b. $150 paid in one year plus $140 paid in two years
c. $100 paid today plus $100 paid in one year plus $100 paid in two years
d. $285 today
The natural rate of unemployment
a. arises from a single problem that has a single solution.
b. is easy for policymakers to reduce.
c. Both a and b are correct.
d. None of the above is correct.
Expenditures on a nation’s domestic production
a. are less than its domestic production.
b. are equal to its domestic production.
c. are greater than its domestic production.
d. could be less than, equal to, or greater than its domestic production.
If Yand Mare constant and Vdoubles, the quantity equation implies that the price level
a. falls to half its original level.
b. doubles.
c. more than doubles.
d. does not change.
The scientific method is
a. the use of modern technology to understand the way the world works.
b. the use of controlled laboratory experiments to understand the way the world works.
c. the dispassionate development and testing of theories about how the world works.
d. the search for evidence to support preconceived theories about how the world works.
Figure 3-14
RefertoFigure3-14.Which of the following is notcorrect?
a. Arturo and Dina could each consume 100 tacos and 100 burritos without trade.
b. Neither Arturo nor Dina could each consume 200 tacos and 200 burritos without
trade.
c. Arturo and Dina could each consume 200 tacos and 200 burritos with trade.
d. Total consumption of burritos could not be 600 either with or without trade.