The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent
and the real interest rate is 4.5 percent. If the consumer price index was 200 in 2007,
what would the consumer price index value be in 2008?
a. 192
b. 208
c. 209
d. 217
If asset markets are driven by the “animal spirits” of investors, then
a. those markets reflect rational behavior.
b. those markets reflect irrational behavior.
c. the efficient markets hypothesis is correct.
d. the stock market exhibits informational efficiency.
A program to reduce inflation is likely to have higher 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.
A high price-earnings ratio for a stock indicates that either the stock is
a. undervalued or people are relatively optimistic about the corporation’s prospects.
b. overvalued or people are relatively optimistic about the corporation’s prospects.
c. overvalued or people are relatively pessimistic about the corporation’s prospects.
d. undervalued or people are relatively pessimistic about the corporation’s prospects.
Social Security payments are
a. included in GDP because they represent current income.
b. included in GDP because they represent potential consumption.
c. excluded from GDP because they are not private pensions.
d. excluded from GDP because they do not reflect the economy’s production.
If people decide to hold more currency relative to deposits, the money supply
a. falls. The larger the reserve ratio is, the more the money supply falls.
b. falls. The larger the reserve ratio is, the less the money supply falls.
c. rises. The larger the reserve ratio is, the more the money supply rises.
d. rises. The larger the reserve ratio is, the less the money supply rises.
The nominal exchange rate is 4 Saudi Arabian riyals, 8 Moroccan dirham, 45 Indian
rupee, or .6 British pounds per U.S. dollar. A double latte espresso and a cinnamon
biscotti costs $6 in the U.S., 24 riyals in Saudi Arabia, 40 Moroccan dirham in
Morocco, 250 Indian rupees in India, and 5 British pounds in Britain. According to
these numbers, where is the real exchange rate between American and foreign goods the
lowest?
a. Saudi Arabia
b. Morocco
c. India
d. Britain
Table 11-11. Megan’s salary for three consecutive years, along with other values, are
presented in the table below.
Refer to Table 11-11. The nominal interest rate for 2009 is
a. 2.40 percent.
b. 3.66 percent.
c. 6.60 percent.
d. 9.60 percent.
Other things the same, an increase in the interest rate makes the quantity of loanable
funds supplied
a. rise, and investment spending rise.
b. rise, and investment spending fall.
c. fall, and investment spending rise.
d. fall, and investment spending fall.
A tax placed on a good
a. causes the effective price to sellers to increase.
b. affects the welfare of buyers of the good but not the welfare of sellers.
c. causes the equilibrium quantity of the good to decrease.
d. creates a burden that is usually borne entirely by the sellers of the good.
An example of an externality is the impact of
a. bad weather on the income of farmers.
b. the personal income tax on a person’s ability to purchase goods and services.
c. pollution from a factory on the health of people in the vicinity of the factory.
d. increases in health care costs on the health of individuals in society.
Most, but not all, athletic apparel sold in the United States is imported from other
nations. If the price of athletic apparel increases, the GDP deflator will
a. increase less than will the consumer price index.
b. increase more than will the consumer price index.
c. not increase, but the consumer price index will increase.
d. increase, but the consumer price index will not increase.
Figure 15-1
Refer to Figure 15-1. If the government imposes a minimum wage of $8, then how
many workers will be unemployed?
a. 0
b. 3000
c. 4000
d. 7000
Assuming all other things equal, what would happen to the U.S. dollar real exchange
rate under each of the following circumstances?
a. The U.S. nominal exchange rate depreciates.
b. U.S. domestic prices increase.
c. Prices in the rest of the world rise.
Figure 6-21
Refer to Figure 6-22. The burden of the tax on sellers is
a. $1 per unit.
b. $1.50 per unit.
c. $2 per unit.
d. $3 per unit.
Minimum wage laws
a. may encourage some teenagers to drop out and take jobs.
b. create labor shortages.
c. have the greatest impact in the market for skilled labor.
d. All of the above are correct.
Which of the following is not a reason economies experience structural unemployment?
a. job search
b. unions
c. minimum-wage laws
d. efficiency wages
Recessions in China and India would cause
a. the U.S. price level and real GDP to rise.
b. the U.S. price level and real GDP to fall.
c. the U.S. price level to rise and real GDP to fall.
d. the U.S. price level to fall and real GDP to rise.
Scenario 11-4
Quinn has job offers in Wrexington and across the country in Charlieville. The
Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would
pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in
Charlieville is
Refer to Scenario 11-4. The Wrexington salary in Charlieville dollars is
a. $30,000.00.
b. $33,333.33.
c. $45,000.00
d. $83,333.33.
Figure 3-1
Panel (a) Panel (b)
Refer to Figure 3-1. The rate of tradeoff between producing chairs and producing
couches is constant in
a. Panel (a).
b. Panel (b).
c. both Panel (a) and Panel (b).
d. neither Panel (a) nor Panel (b).
In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per
dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar
in China?
a. 7.2 yuan
b. 6 yuan
c. 5 yuan
d. 3.6 yuan
Ryan plans on going to go to study engineering. What he learns about existing
information increases
a. both technological knowledge and human capital.
b. technological knowledge but not human capital.
c. human capital but not technological knowledge.
d. neither technological knowledge nor human capital.
“Allowing all individuals access to Medicare and Medicaid for health insurance is the
fair thing to do” is an example of a
a. contradiction in economic theory.
b. positive economic statement.
c. negative economic statement.
d. normative economic statement.
Northwest Wholesale Foods sells common stock. The company is using
a. equity financing and the return shareholders earn is fixed.
b. equity financing and the return shareholders earn depends on how profitable the
company is.
c. debt financing and the return shareholders earn is fixed.
d. debt financing and the return shareholders earn depends on how profitable the
company is.
When the price of a good is $5, the quantity demanded is 120 units per month; when the
price is $7, the quantity demanded is 100 units per month. Using the midpoint method,
the price elasticity of demand is about
a. 0.55.
b. 1.83.
c. 2.
d. 10.
Tom was laid off and is expecting to be recalled. He has not looked for work since
being laid off. Bill is not employed and not laid off. Who is counted as unemployed in
the U.S. labor force statistics?
a. Tom and Bill even if he has not looked for work during the previous 4 weeks.
b. Tom and Bill if he has looked for work during the previous 4 weeks.
c. Not Tom. Bill even if he has not looked for work during the previous 4 weeks.
d. Not Tom. Bill if he has looked for work during the previous 4 weeks.
Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium
quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases
consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight
loss of the tax is
a. $200.
b. $400.
c. $600.
d. $1,200.
In the open-economy macroeconomic model, the market for loanable funds equates
national saving with
a. domestic investment.
b. net capital outflow.
c. national consumption minus domestic investment.
d. None of the above is correct.
Figure 6-21
Refer to Figure 6-22. How much tax revenue does this tax generate for the
government?
a. $150
b. $180
c. $250
d. $300
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. The amount of the tax on each unit of the good is
a. $1.
b. $4.
c. $5.
d. $9.
The imposition of a binding price ceiling on a market causes quantity demanded to be
a. greater than quantity supplied.
b. less than quantity supplied.
c. equal to quantity supplied.
d. Both a) and b) are possible.
The aggregate-demand curve shows that a decrease in the price level
a. decreases the dollar value of goods and services demanded in the economy.
b. decreases the real value of goods and services demanded in the economy.
c. increases the dollar value of goods and services demanded in the economy.
d. increases the real value of goods and services demanded in the economy.
Figure 3-6
Maxine’s Production Possibilities Frontier Daisy’s Production Possibilities
Frontier
Refer to Figure 3-6. Suppose Daisy is willing to trade 3/4 tart to Maxine for each pie
that Maxine makes and sends to Daisy. Which of the following combinations of pies
and tarts could Maxine not then consume, assuming Maxine specializes in making pies
and Daisy specializes in making tarts?
a. 4 pies and 6 tarts
b. 6 pies and 5 tarts
c. 8 pies and 3 tarts
d. 10 pies and 1.5 tarts
Suppose over the last year that the price of iron ore increased from $1,200 a ton to
$1,300 a ton. Over the same time a measure of the overall price level increased from
168 to 187. The price of iron ore increased by
a. less than inflation, and this means it became relatively less scarce.
b. less than inflation, and this means it became scarcer.
c. more than inflation, and this means it became scarcer.
d. more than inflation, but this doesn”t necessarily mean that it become scarcer.
Which of the following likely occurs when households and firms are pessimistic?
a. Increased spending, increased aggregate demand, rising real GDP and a falling
unemployment rate.
b. Decreased spending, increased aggregate demand, rising real GDP and a falling
unemployment rate.
c. Decreased spending, decreased aggregate demand, falling real GDP and a falling
unemployment rate.
d. Decreased spending, decreased aggregate demand, falling real GDP and a rising
unemployment rate.
What is the difference between human capital and technology?
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.
The sale of either stocks or bonds to raise money is known as equity finance.
The President counts among his economic advisors the Congressional Budget Office.
An increase in the demand for loanable funds increases the equilibrium interest rate and
increases the equilibrium level of saving.
Individual demand curves are summed vertically to obtain the market demand curve.
In an open economy national saving equals domestic investment plus net capital
outflow.
When demand increases so that market price increases, producer surplus increases
because (1) producer surplus received by existing sellers increases, and (2) new sellers
enter the market.
The inflation rate is measured as the percentage change in a price index.
Goods produced abroad and sold domestically are called exports and goods produced
domestically and sold abroad are called imports.
A decrease in the price of a product and an increase in the number of buyers in the
market affect the demand curve in the same general way.
Demand for a good is said to be inelastic if the quantity demanded increases
substantially when the price falls by a small amount.
When the government imposes taxes on buyers and sellers of a good, society loses
some of the benefits of market efficiency.
Policymakers who influence aggregate demand can potentially mitigate the severity of
economic fluctuations.
According to classical macroeconomic theory, changes in the money supply change
nominal but not real variables.
If the price of a good in the U.S. is $10, the exchange rate is 2 units of foreign currency
per dollar, and the foreign price of the same good is 30 units of foreign currency, then
the real exchange rate is 2/3.
The Social Security tax is a labor tax.
If a tax is imposed on the buyers of a product, then the tax burden will fall entirely on
the buyers.
Suppose that Australia imposes a tariff on imported beef. If the increase in producer
surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction
in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.
Individual demand curves are summed horizontally to obtain the market demand curve.