If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and
services from foreign countries, then it has
a. $7.2 billion of exports and $4.8 billion of imports.
b. $7.2 billion of imports and $4.8 billion of exports.
c. $4.8 billion of exports and $2.4 billion of imports.
d. $4.8 billion of imports and $2.4 billion of exports.
In which case below is the real interest rate the highest?
a. the nominal interest rate = 4% and inflation = 3%
b. the nominal interest rate = 3% and inflation = 1%
c. the nominal interest rate = 2% and inflation = -2%
d. the nominal interest rate = 1% and inflation = -4%
In the short run, which of the following rates of growth in the money supply is likely to
lead to the lowest level of unemployment in the economy?
a. 3 percent per year
b. 5 percent per year
c. 7 percent per year
d. 9 percent per year
According to the short-run Phillips curve, inflation
a. and unemployment would fall if the policymakers decreased the money supply.
b. would fall and unemployment would rise if policymakers decreased the money
supply.
c. and unemployment would fall if the policymakers increased the money supply.
d. would fall and unemployment would rise if policymakers increased the money
supply.
Figure 6-18
Refer to Figure 6-18. The amount of the tax per unit is
a. $1.
b. $1.50.
c. $2.50.
d. $3.50.
The current price of neckties is $30, but the equilibrium price of neckties is $25. As a
result,
a. the quantity supplied of neckties exceeds the quantity demanded of neckties at the
$30 price.
b. the equilibrium quantity of neckties exceeds the quantity demanded at the $30 price.
c. there is a surplus of neckties at the $30 price.
d. All of the above are correct.
If the demand for loanable funds shifts to the right, then the equilibrium interest rate
a. and quantity of loanable funds rise.
b. and quantity of loanable funds fall.
c. rises and the quantity of loanable funds falls.
d. falls and the quantity of loanable funds rises.
Figure 19-3
Refer to this diagram to answer the questions below.
Refer to Figure 19-3. Which curve shows the relation between the exchange rate and
net exports?
a. the demand curve in panel a.
b. the demand curve in panel c.
c. the supply curve in panel a.
d. the supply curve in panel c.
Figure 4-16
Refer to Figure 4-16. In this market, equilibrium price and quantity, respectively, are
a. $10 and 30 units.
b. $10 and 50 units.
c. $10 and 70 units.
d. $4 and 50 units.
The benefit that government receives from a tax is measured by
a. deadweight loss.
b. consumer surplus.
c. tax incidence.
d. tax revenue.
A very hot summer in Atlanta will cause
a. the demand curve for lemonade to shift to the left.
b. the demand for air conditioners to decrease.
c. the demand for jackets to decrease.
d. a movement downward and to the right along the demand curve for tank tops.
If the current allocation of resources in the market for hammers is inefficient, then it
must be the case that
a. producer surplus exceeds consumer surplus in the market for hammers.
b. consumer surplus exceeds producer surplus in the market for hammers.
c. the sum of consumer surplus and producer surplus could be increased by moving to a
different allocation of resources.
d. the costs that sellers of hammers are incurring could be reduced by moving to a
different allocation of resources.
Whenever the price of an asset rises above what appears to be its fundamental value,
the market is said to be experiencing a
a. conjectural mistake.
b. fundamental mishap.
c. speculative bubble.
d. temporary inefficiency.
Which of the following is not generally regarded by economists as a legitimate reason
for the government to intervene in a market?
a. to promote efficiency
b. to promote equality
c. to enforce property rights
d. to protect an industry from foreign competition
Figure 4-7
Panel (a) Panel (b)
Refer to Figure 4-7. The graphs show the demand for cigarettes. In Panel (b), the
arrows are consistent with which of the following events?
a. an increase in the price of cigarettes
b. placing a tax on cigarettes
c. the prohibition of cigarette advertisements on television
d. decreasing the price of marijuana, given that tobacco and marijuana are complements
Wealth is redistributed from debtors to creditors when inflation is
a. high, whether it is expected or not.
b. low, whether it is expected or not.
c. unexpectedly high.
d. unexpectedly low.
At the equilibrium price of a good, the good will be purchased by those buyers who
a. value the good more than price.
b. value the good less than price.
c. have the money to buy the good.
d. consider the good a necessity.
Political Instability Abroad
Suppose that political instability in other countries makes people fear for the value of
their assets in these countries so that they desire to purchase more U.S assets.
Refer to Political Instability Abroad. What would the change in the interest rate
created by foreigners wanting to buy more U.S. assets do to investment spending in the
U.S.?
a. make it rise which by itself would increase U.S. aggregate demand.
b. make it rise which by itself would decrease U.S. aggregate demand.
c. make it fall which by itself would increase U.S. aggregate demand.
d. make it fall which by itself would decrease U.S. aggregate demand.
The concept of present value helps explain why
a. investment decreases when the interest rate increases, and it also helps explain why
the quantity of loanable funds demanded decreases when the interest rate increases.
b. investment decreases when the interest rate increases, but it is of no help in
explaining why the quantity of loanable funds demanded decreases when the interest
rate increases.
c. the quantity of loanable funds demanded decreases when the interest rate increases,
but it is of no help in explaining why investment decreases when the interest rate
increases.
d. None of the above are correct; the concept of present value is of no help in
explaining why either investment or the quantity of loanable funds demanded decreases
when the interest rate increases.
Shifts in aggregate demand affect the price level in
a. the short run but not in the long run.
b. the long run but not in the short run.
c. both the short and long run.
d. neither the short nor long run.
Table 4-5
Refer to Table 4-5. If these are the only four sellers in the market, then when the price
increases from $4 to $6, the market quantity supplied
a. decreases by 10 units.
b. decreases by 20 units.
c. increases by 10 units.
d. increases by 20 units.
Maureen’s college raises the cost of room and board per semester. This increase raises
Maureen’s opportunity cost of attending college
a. even if the amount she would have to pay for room and board if she didn’t attend
college rose by the same amount. An increase in opportunity cost reduces Maureen’s
incentive to attend college.
b. even if the amount she would have to pay for room and board if she didn’t attend
college rose by the same amount. An increase in opportunity cost increases Maureen’s
incentive to attend college.
c. only if the amount she would have to pay for room and board if she didn’t attend
college rose by less than the increase in the amount her college charges. An increase in
opportunity cost reduces Maureen’s incentive to attend college.
d. only if the amount she would have to pay for room and board if she didn’t attend
college rose by less than the increase in the amount her college charges. An increase in
opportunity cost increases Maureen’s incentive to attend college.
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 average citizen of India in 2008 had
a. less real income than the typical resident of Canda in 1870.
b. less real income than the typical resident of the United Kingdom in 1870.
c. higher real income than a resident of Japan in 2008.
d. higher real income than a resident of China in 2008.
What is the present value of a payment of $150 one year from today if the interest rate
is 6 percent?
a. $141.11
b. $141.36
c. $141.75
d. None of the above are correct to the nearest cent.
If there is shortage of loanable funds, then
a. the supply for loanable funds shifts right and the demand shifts left.
b. the supply for loanable funds shifts left and the demand shifts right.
c. neither curve shifts, but the quantity of loanable funds supplied increases and the
quantity demanded decreases as the interest rate rises to equilibrium.
d. neither curve shifts, but the quantity of loanable funds supplied decreases and the
quantity demanded increases as the interest rate falls to equilibrium.
Figure 5-4
Refer to Figure 5-4. Suppose the point labeled B is the “halfway point” on the demand
curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01,
the price elasticity of demand is
a. less than 1 but greater than zero.
b. equal to 1.
c. greater than 1.
d. equal to zero.
Toni put $500 into an account and one year later she had $534. What interest rate was
paid on Toni’s deposit?
a. 7.1 percent
b. 5.9 percent
c. 6.8 percent
d. None of the above is correct.
There are very few, if any, good substitutes for automotive tires. Therefore, the demand
for automotive tires would tend to be
a. elastic.
b. unit elastic.
c. inelastic.
d. highly responsive to changes in income as well as changes in prices.
To say that a price ceiling is nonbinding is to say that the price ceiling
a. results in a surplus.
b. is set above the equilibrium price.
c. causes quantity demanded to exceed quantity supplied.
d. All of the above are correct.
During the last few decades in the United States, health officials have argued that eating
too much beef might be harmful to human health. As a result, there has been a
significant decrease in the amount of beef produced. Which of the following best
explains the decrease in production?
a. Beef producers, concerned about the health of their customers, decided to produce
relatively less beef.
b. Government officials, concerned about consumer health, ordered beef producers to
produce relatively less beef.
c. Individual consumers, concerned about their own health, decreased their demand for
beef, which lowered the equilibrium price of beef, making it less attractive to produce.
d. Anti-beef protesters have made it difficult for both buyers and sellers of beef to meet
in the marketplace.
As the price level falls
a. people are more willing to lend, so interest rates rise.
b. people are more willing to lend, so interest rates fall.
c. people are less willing to lend, so interest rates fall.
d. people are less willing to lend, so interest rates rise.
A higher rate of return on saving has
a. an income effect that discourages saving and a substitution effect that encourages
saving.
b. an income effect that encourages saving and a substitution effect that discourages
saving.
c. income and substitution effects that both decrease saving.
d. income and substitution effects that both increase saving.
Which of the following statements about recessions is true?
a. An old rule of thumb defining recession is two consecutive quarters of falling
nominal GDP.
b. Recessions occur at regular intervals and last standard amounts of time.
c. There is no ironclad rule for the declaration of recessions.
d. Recessions are associated with low unemployment and high income.
By keeping the basket of goods and services the same when computing the CPI, the
Bureau of Labor Statistics isolates the effects of price changes from the effect of any
quantity changes that might be occurring at the same time.
If one producer has the absolute advantage in the production of all goods, then that
same producer will have the comparative advantage in the production of all goods as
well.
As the interest rate rises, it is possible that net capital outflow could move from a
positive to a negative value.
Figure 2-14
Refer to Figure 2-14. When this economy produces 30 doghouses and 25 dishwashers
there is full employment.
Sellers respond to a surplus by cutting their prices.
Microeconomics and macroeconomics are closely linked.
The slope of an upward-sloping line is positive, and the slope of a downward-sloping
line is negative.
Make a list of things that would shift the aggregate demand curve to the right.
Reductions in transportation costs help explain the increase in U.S. trade flows.
When net capital outflow is negative, it means that on net the value of domestic assets
purchased by foreigners exceeds the value of foreign assets purchased by domestic
residents.
Most studies have found that tobacco and marijuana are substitutes rather than
complements.
If the Fed followed a rule for monetary policy, the time inconsistency problem would be
eliminated.
Assume that when $100 of new reserves enter the banking system, the money supply
ultimately increases by $800. Assume also that no banks hold excess reserves and that
the entire money supply consists of bank deposits. If, at a point in time, reserves for all
banks amount to $750, then at that same point in time, loans for all banks amount to
$6,000.
A decrease in demand will cause a decrease in price, which will cause a decrease in
supply.
In an unregulated labor market, the wage adjusts to balance labor supply and labor
demand.
All financial intermediaries are financial institutions, but not all financial institutions
are financial intermediaries.
Some economists argue suddenly reducing money supply growth is a costly way to
reduce inflation and that it may not work. For example, if a government cuts money
growth but makes no real fiscal reforms, people will expect the government will
eventually need to expand the money supply to pay for its expenditures. Thus, the
promise to fight inflation will not be credible. Explain why credibility is important to a
reduction in the inflation rate.
If the current year CPI is 140, then the price level has increased 40 percent since the
base year.
Some economists have argued that unemployment insurance improves the ability of the
economy to match each worker with the most appropriate job.