Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the right-hand diagram, “Inf Rate” means
“Inflation Rate.”
Refer to Figure 22-8. A significant increase in the world price of oil could explain
a. the shift of the aggregate-supply curve from AS1 to AS2, but it could not explain the
shift of the Phillips curve from PC1 to PC2.
b. the shift of the Phillips curve from PC1 to PC2, but it could not explain the shift of
the aggregate-supply curve from AS1 to AS2.
c. both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the
Phillips curve from PC1 to PC2.
d. neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the
Phillips curve from PC1 to PC2.
Which of the following is likely to have the most price elastic demand?
a. dental floss
b. milk
c. salt
d. diamond earrings
The following table contains a supply schedule for a good.
If the law of supply applies to this good, then Q1 could be
a. 0.
b. 50.
c. 100.
d. 150.
David increases the number of companies in which he holds stocks.
a. This reduces risk’s standard deviation and firm-specific risk.
b. This reduces risk’s standard deviation and market risk.
c. This raises market risk, but lowers firm-specific risk. What happens to overall risk is
unclear.
d. This raises firm-specific risk, but lowers market risk. What happens to overall risk is
unclear.
Suppose that the equilibrium price in the market for widgets is $5. If a law increased the
minimum legal price for widgets to $6, producer surplus
a. would necessarily increase even if the higher price resulted in a surplus of widgets.
b. would necessarily decrease because the higher price would create a surplus of
widgets.
c. might increase or decrease.
d. would be unaffected.
Suppose that the nominal exchange rate is 0.80 euro per dollar, that the price of a basket
of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro.
Suppose that these values change to 0.90 euro per dollar, $600, and 600 euro. Then the
real exchange rate would
a. appreciate which by itself would make U.S. net exports fall.
b. appreciate which by itself would make U.S. net exports rise.
c. depreciate which by itself would make U.S. net exports fall.
d. depreciate which by itself would make U.S. net exports rise.
The members of the Federal Reserve’s Board of Governors
a. are appointed by the president of the U.S. and confirmed by the U.S. Senate.
b. serve six-year terms.
c. are also the presidents of the regional Federal Reserve banks.
d. share power equally, with no governor having any more influence or power than any
other governor.
The minimum wage does not apply to
a. jobs for teenagers.
b. jobs for members of minority groups.
c. unpaid internships.
d. jobs that include on-the-job training.
If the government reduced the minimum wage and pursued expansionary monetary
policy, then in the long run
a. both the unemployment rate and the inflation rate would be higher.
b. both the unemployment rate and the inflation rate would be lower.
c. the unemployment rate would be higher and the inflation rate would be lower.
d. the unemployment rate would be lower and the inflation rate would be higher.
Figure 22-5
Use the graph below to answer the following questions.
Refer to Figure 22-5. Curve 1 is the
a. long-run aggregate supply curve.
b. short-run aggregate supply curve.
c. long-run Phillips curve.
d. short-run Phillips curve.
Anna deposited $10,000 into an account three years ago. The first year she earned 12
percent interest, the second year she earned 8 percent interest, and the third year she
earned 4 percent interest. How much money does she have in her account today?
a. $12,579.84
b. $12,596.80
c. $12,597.12
d. None of the above are correct to the nearest cent.
If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was
the GDP deflator ?
a. 25
b. 40
c. 250
d. 400
One way to characterize the difference between positive statements and normative
statements is as follows:
a. Positive statements tend to reflect optimism about the economy and its future,
whereas normative statements tend to reflect pessimism about the economy and its
future.
b. Positive statements offer descriptions of the way things are, whereas normative
statements offer opinions on how things ought to be.
c. Positive statements involve advice on policy matters, whereas normative statements
are supported by scientific theory and observation.
d. Economists outside of government tend to make normative statements, whereas
government-employed economists tend to make positive statements.
Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds
to buy new machinery for one of its breweries.
a. Fran and Miller are both investing.
b. Fran and Miller are both saving.
c. Fran is investing; Miller is saving.
d. Fran is saving; Miller is investing.
If two goods are complements, their cross-price elasticity will be
a. positive.
b. negative.
c. zero.
d. equal to the difference between the income elasticities of demand for the two goods.
Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays
$60,000. Which pair of CPIs would ensure that the two salaries have the same
purchasing power?
a. 80 in Kansas City and 100 in Dallas
b. 125 in Kansas City and 150 in Dallas
c. 100 in Kansas City and 124.5 in Dallas
d. 100 in Kansas City and 140 in Dallas
Which of the following would shift the long-run Phillips curve to the right?
a. expansionary fiscal policy
b. an increase in the inflation rate
c. increases in unemployment compensation
d. None of the above is correct.
Figure 3-3
Arturo’s Production Possibilities Frontier Dina’s Production Possibilities Frontier
Refer to Figure 3-3. Dina has an absolute advantage in the production of
a. burritos and a comparative advantage in the production of tacos.
b. burritos and a comparative advantage in the production of burritos.
c. neither good and a comparative advantage in the production of tacos.
d. neither good and a comparative advantage in the production of burritos.
On goods and services, Harry spent $32,000 in 2004 and $39,000 in 2009. The
consumer price index was 192 for 2004 and 217 for 2009. Harry’s 2004 spending in
2009 dollars is about
a. $34,507.
b. $35,667.
c. $36,167.
d. $37,578.
A form of government spending that is not made in exchange for a currently produced
good or service is called
a. a transfer payment.
b. consumption.
c. investment.
d. None of the above is correct.
In the housing market, supply and demand are
a. more elastic in the short run than in the long run, and so rent control leads to a larger
shortage of apartments in the short run than in the long run.
b. more elastic in the short run than in the long run, and so rent control leads to a larger
shortage of apartments in the long run than in the short run.
c. more elastic in the long run than in the short run, and so rent control leads to a larger
shortage of apartments in the short run than in the long run.
d. more elastic in the long run than in the short run, and so rent control leads to a larger
shortage of apartments in the long run than in the short run.
Figure 9-7. The figure applies to the nation of Wales and the good is cheese.
Refer to Figure 9-7. Which of the following is a valid equation for Welsh consumer
surplus with trade?
a. Consumer surplus with trade = (1/2)(Q0)(P1 – P0).
b. Consumer surplus with trade = (1/2)(Q0)(P3 – P0).
c. Consumer surplus with trade = (1/2)(Q1)(P3 – P1).
d. None of the above is correct.
In the open-economy macroeconomic model, if the supply of loanable funds shifts
right, then
a. the supply of dollars in the market for foreign-currency exchange shifts left.
b. the supply of dollars in the market for foreign-currency exchange shifts right.
c. the demand for dollars in the market for foreign-currency exchange shifts left.
d. the demand for dollars in the market for foreign-currency exchange shifts right.
Table 7-9
The numbers reveal the opportunity costs of providing 10 piano lessons of equal
quality.
Refer to Table 7-9. The equilibrium market price for 10 piano lessons is $400. What is
the total producer surplus in the market?
a. $0
b. $300
c. $400
d. $700
Figure 6-20
Refer to Figure 6-20. Suppose sellers, rather than buyers, were required to pay this tax
(in the same amount per unit as shown in the graph). Relative to the tax on buyers, the
tax on sellers would result in
a. buyers bearing the same share of the tax burden.
b. sellers bearing the same share of the tax burden.
c. the same amount of tax revenue for the government.
d. All of the above are correct.
Kyle is planning to take a roadtrip. After he makes his plans, he has to make some
unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two
events should Kyle consider in deciding if it is still worthwhile to go on the trip?
a. the unexpected repairs and the increase in the price of gas
b. the unexpected increase for repairs, but not the increase in the price of gas
c. the increase in the price of gas, but not the unexpected repairs
d. neither the unexpected increase in the price of gas nor the unexpected repairs
Diversification
a. increases the likely fluctuation in a portfolio’s return. Thus, the likely standard
deviation of the portfolio’s return is higher.
b. increases the likely fluctuation in a portfolio’s return. Thus, the likely standard
deviation of the portfolio’s return is lower.
c. reduces the likely fluctuation in a portfolio’s return. Thus, the likely standard
deviation of the portfolio’s return is higher.
d. reduces the likely fluctuation in a portfolio’s return. Thus, the likely standard
deviation of the portfolio’s return is lower.
Cross-price elasticity of demand measures how
a. the price of one good changes in response to a change in the price of another good.
b. the quantity demanded of one good changes in response to a change in the quantity
demanded of another good.
c. the quantity demanded of one good changes in response to a change in the price of
another good.
d. strongly normal or inferior a good is.
Which of the following could explain a decrease in the equilibrium interest rate and an
increase in the equilibrium quantity of loanable funds?
a. The demand for loanable funds shifted rightward.
b. The demand for loanable funds shifted leftward.
c. The supply of loanable funds shifted rightward.
d. The supply of loanable funds shifted leftward.
Suppose that the Federal Reserve Bank announces that it will be making a change to a
key interest rate to increase the money supply. This is likely because
a. the Federal Reserve Bank is worried about inflation.
b. the Federal Reserve Bank is worried about unemployment.
c. the Federal Reserve Bank is hoping to reduce the demand for goods and services.
d. the Federal Reserve Bank is worried that the economy is growing too quickly.
Consider two items that might be included in GDP: (1) the estimated rental value of
owner-occupied housing and (2) purchases of newly-constructed homes. How are these
two items accounted for when GDP is calculated?
a. Both item (1) and item (2) are included in the consumption component of GDP.
b. Item (1) is included in the consumption component of GDP, while item (2) is
included in the investment component of GDP.
c. Item (1) is included in the investment component of GDP, while item (2) is included
in the consumption component of GDP.
d. Only item (2) is included in GDP, and it is included in the investment component.
If a country exports more than it imports, then it has
a. positive net exports and positive net capital outflows.
b. positive net exports and negative net capital outflows.
c. negative net exports and positive net capital outflows.
d. negative net exports and negative net capital outflows.