Buyers are able to buy all they want to buy and sellers are able to sell all they want to
sell at
a. prices at and above the equilibrium price.
b. prices at and below the equilibrium price.
c. prices above and below the equilibrium price, but not at the equilibrium price.
d. the equilibrium price but not above or below the equilibrium price.
Which of the following costs of inflation can be significant even if actual inflation and
expected inflation are the same?
a. menu costs
b. inflation tax
c. shoe leather costs
d. All of the above are correct.
An economy’s production of two goods is efficient if
a. all members of society consume equal portions of the goods.
b. the goods are produced using only some of society’s available resources.
c. it is impossible to produce more of one good without producing less of the other.
d. the opportunity cost of producing more of one good is zero.
Suppose that the Federal reserve is concerned about the effects of falling stock prices on
the economy. What could it do?
a. buy bonds to raise the interest rate
b. buy bonds to lower the interest rate
c. sell bonds to raise the interest rate
d. sell bonds to raise the interest rate
When the money market is drawn with the value of money on the vertical axis, if
money supply and money demand both shift to the right
a. the price level must have risen
b. the price level must have fallen.
c. the price level rises if money supply shifts farther than money demand.
d. the price level falls if money supply shifts farther than money demand.
According to the quantity theory of money, a 3 percent increase in the money supply
a. causes the price level to rise by 3 percent.
b. causes the price level to rise by less than 3 percent.
c. leaves the price level unchanged.
d. causes the price level to fall by 3 percent.
Table 3-9
Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Refer to Table3-9. We could use the information in the table to draw a production
possibilities frontier for Maya and a second production possibilities frontier for Miguel.
If we were to do this, measuring mixers along the horizontal axis, then
a. the slope of Maya’s production possibilities frontier would be 2 and the slope of
Miguel’s production possibilities frontier would be -2.
b. the slope of Maya’s production possibilities frontier would be 0.5 and the slope of
Miguel’s production possibilities frontier would be -0.5.
c. the slope of Maya’s production possibilities frontier would be 1.67 and the slope of
Miguel’s production possibilities frontier would be -1.67.
d. the slope of Maya’s production possibilities frontier would be 0.6 and the slope of
Miguel’s production possibilities frontier would be -0.6.
In the actual economy, households
a. spend all of their income.
b. divide their income among spending, taxes, and saving.
c. buy all goods and services produced in the economy.
d. Both (a) and (c) are correct.
An increase in supply is represented by a
a. movement downward and to the left along a supply curve.
b. movement upward and to the right along a supply curve.
c. rightward shift of a supply curve.
d. leftward shift of a supply curve.
Figure 4-5
RefertoFigure4-5.Which of the following would cause the demand curve to shift from
Demand C to Demand A in the market for DVDs?
a. an increase in the price of DVDs
b. a decrease in the price of DVD players
c. a change in consumer preferences toward watching movies in movie theaters rather
than at home
d. an expectation by buyers that their incomes will increase in the very near future
Which of the following statements about real and nominal interest rates is correct?
a. When the nominal interest rate is rising, the real interest rate is necessarily rising;
when the nominal interest rate is falling, the real interest rate is necessarily falling.
b. If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the
real interest rate is 7 percent.
c. An increase in the real interest rate is necessarily accompanied by either an increase
in the nominal interest rate, an increase in the inflation rate, or both.
d. When the inflation rate is positive, the nominal interest rate is necessarily greater
than the real interest rate.
A microeconomist as opposed to a macroeconomist might study
a. the effect of a national healthcare program on the nation’s unemployment rate.
b. the effect of new regulations on production in the pulp and paper industry.
c. the effect of changes in interest rates on gross domestic product.
d. the growth rate of production in the economy.
Suppose that you have received $300 as a birthday gift. You can spend it today or you
can put the money in a bank account for a year and earn 5 percent interest. The
opportunity cost of spending the money today, in terms of what you could have after
one year, is
a. $0.
b. $15.
c. $305.
d. $315.
An example of a perfectly competitive market would be the market for
a. electricity.
b. soybeans.
c. coffee shops.
d. restaurants.
You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider
eating a third. As a rational consumer you should make your choice by comparing
a. the benefits from eating all three bowls of ice cream to how much three bowls of ice
cream costs.
b. the benefits from eating all three bowls of ice cream to how much one more bowl of
ice cream costs.
c. the benefits from eating one more bowl of ice cream to how much three bowls of ice
cream costs.
d. the benefits from eating one more bowl of ice cream to how much one more bowl of
ice cream costs.
President George W. Bush and congress cut taxes and raised government expenditures
in 2003. According to the aggregate supply and aggregate demand model
a. both the tax cut and the increase in government expenditures would tend to increase
output.
b. only the tax cut would tend to increase output.
c. only the increase in government expenditures would tend to increase output.
d. neither the tax cut nor the increase in government expenditures would tend to
increase output.
You are considering staying in college another semester so that you can complete a
major in economics. In deciding whether or not to stay you should
a. compare the total cost of your education to the total benefits of your education.
b. compare the total cost of your education to the benefits of staying one more semester.
c. compare the cost of staying one more semester to the benefits of staying one more
semester.
d. compare the total benefits of your education to the cost of staying one more semester.
When fear of default on bonds issued by U.S. corporations decline, then
a. net capital outflow and the exchange rate both rise.
b. net capital outflow rises and the exchange rate falls.
c. net capital outflow falls and the exchange rate rises.
d. net capital outflow and the exchange rate both fall.
The Federal Reserve is a privately operated commercial bank.
a. True
b. False
Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses
is $30 per dozen. We would expect a
a. shortage to exist and the market price of roses to increase.
b. shortage to exist and the market price of roses to decrease.
c. surplus to exist and the market price of roses to increase.
d. surplus to exist and the market price of roses to decrease.
Bank runs
a. will affect neither the money supply nor the money multiplier.
b. increase the money supply.
c. can be neither prevented nor mitigated by the Federal Reserve.
d. are a problem because banks only hold a fraction of deposits as reserves.
When economists make positive statements, they are
a. speaking as scientists.
b. speaking as policy advisers.
c. making claims about how the world should be.
d. revealing that they are very conservative in their views of how the world works.
Suppose lawn mowers are part of the market basket used to compute the CPI. Suppose
also that the quality of lawn mowers deteriorates while the price of lawn mowers stays
the same. If the Bureau of Labor Statistics is able to precisely adjust the CPI for the
improvement in quality, then, other things equal,
a. the CPI will rise.
b. the CPI will fall.
c. the CPI will stay the same.
d. lawn mowers will no longer be included in the market basket.
Figure 2-2
Refer to Figure2-2. If Box A of this circular-flow diagram represents firms, then which
box represents households?
a. Box B
b. Box C
c. Box D
d. Any one of the other boxes (B, C, or D) could represent households.
If the consumer price index changes from 125 in September to 150 in October, what is
the rate of inflation?
a. 45.5%
b. 20.0%
c. 16.7%
d. 9.1%
Veronica deposited $1,000 into an account two years ago. The first year she earned 7
percent interest; the second year she earned 5 percent. How much money does Veronica
have in her account today?
a. $1,133.31
b. $1,120.00
c. $1,123.50
d. None of the above are correct to the nearest cent.
Which of the following does notreduce the potential burden of an increase in debt on
future generations?
a. the growth rate of output is high
b. in response to increased debt, parents save more to leave their children larger
bequests
c. budget deficits raise interest rates
d. All of the above are correct.
Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine
Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last
week, the city government announced a plan to build a new landfill on Pine Street just
down the street from the house Yvette purchased. As a result of the city’s announced
plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs
and then sell the house for $290,000, or she can forgo the repairs and sell the house as it
is for $250,000. She should
a. keep the house and live in it.
b. go ahead with the $50,000 in repairs and sell the house for $290,000.
c. forgo the repairs and sell the house as it is for $250,000.
d. move the house from Pine Street to a more desirable location, regardless of the cost
of doing so.
When calculating the cost of college, which of the following should you probably
include?
a. The cost of your meal plan for the cafeteria.
b. The cost of books required for college classes
c. The income you earn at your part-time job.
d. The cost of living in the dormitory.
The U.S. government pays an economist at the U.S. Department of Commerce
$100,000 in salary in 2013. The economist then retires. In 2014, the government pays
him $60,000 in Social Security benefits. Which of the following is correct?
a. The 2013 payment is included in 2013 GDP as government purchases, and the 2014
payment is included in 2014 GDP as government purchases.
b. The 2013 payment is included in 2013 GDP as government purchases, but the 2014
payment is not included in 2014 GDP.
c. The 2013 payment is included in 2013 GDP as government purchases, and the 2014
payment is included in 2014 GDP as government transfer payments.
d. The 2013 payment is included in 2013 GDP as government purchases, and the 2014
payment is allocated to previous years’ GDP according to the amount of work
performed by the economist each year.