From 1980 to 1987
a. foreigners were buying more assets from the United States than Americans were
buying abroad. The United States was going into debt.
b. Americans were buying more assets abroad than foreigners were buying from the
United States. The United States was going into debt.
c. foreigners were buying more assets from the United States than Americans were
buying abroad. The United States was moving into surplus.
d. Americans were buying more assets abroad than foreigners were buying from the
United States. The United States was moving into surplus.
Which of the following is notconsistent with the efficient market hypothesis?
a. Stock prices should follow a random walk.
b. Index funds should typically outperform highly managed funds.
c. News has no effect on stock prices.
d. There is little point in spending many hours studying the business pages looking for
undervalued stocks.
In the early 1930s in the United States, there was a
a. large increase in output. In the early 1940s there was also a large increase in output.
b. large increase in output. In the early 1940s there was a large decrease in output.
c. large decrease in output. In the early 1940s there was a large increase in output.
d. large decrease in output. In the early 1940s there was also a large decrease in output.
Which of the following pairs of terms refer to the same thing?
a. “capital” and “physical capital”
b. “technological knowledge” and “human capital”
c. ‘standard of living” and “human capital”
d. ‘standard of living” and “productivity”
You use U.S. currency to pay the owner of a restaurant for a delicious meal. The
currency
a. has no intrinsic value. The exchange is an example of barter.
b. has no intrinsic value. The exchange is not an example of barter.
c. has intrinsic value. The exchange is not an example of barter.
d. has intrinsic value. The exchange is not an example of barter.
The long-run aggregate supply curve
a. is vertical.
b. is a graphical representation of the classical dichotomy.
c. indicates monetary neutrality in the long run.
d. All of the above are correct.
Figure 3-10
RefertoFigure3-10.If Alice produces only lemonade, she can produce
a. 200 pitchers per day.
b. 300 pitchers per day.
c. 400 pitchers per day.
d. 450 pitchers per day.
If mayonnaise and Miracle Whip are substitutes, then which of the following would
increase the demand for Miracle Whip?
a. a decrease in the price of Miracle Whip
b. an increase in the price of mayonnaise
c. a decrease in the price of mayonnaise
d. Both a and b are correct.
An increase in the government’s budget deficit means
a. public saving is greater than $0 and increasing.
b. public saving is greater than $0 and decreasing.
c. public saving is less than $0 and increasing.
d. public saving is less than $0 and decreasing.
Adults who were not working but who had jobs from which they were temporarily
absent are included in the Bureau of Labor Statistics’ “employed” category.
a. True
b. False
Figure 4-18
RefertoFigure4-18. At a price of $15, there would be a
a. surplus of 400 units.
b. shortage of 200 units.
c. shortage of 400 units.
d. shortage of 600 units.
When a country saves a larger portion of its GDP than it did before, it will have
a. more capital and higher productivity.
b. more capital and lower productivity.
c. less capital and higher productivity.
d. less capital and lower productivity.
The recessions of the 1970s are often attributed to
a. declining inflation expectations.
b. an increase in oil prices.
c. declines in the price of stock.
d. decreases in the money supply.
Unemployment insurance
a. reduces the hardship of unemployment, but it also increases the amount of
unemployment.
b. reduces the incentive for the unemployed to find and take new jobs.
c. causes workers to be less likely to seek guarantees of job security when they
negotiate with employers over the terms of employment.
d. All of the above are correct.
At an annual interest rate of 10 percent, about how many years will it take $100 to triple
in value?
a. 8
b. 10
c. 12
d. 14
Estimates of the values of which of the following non-market goods or services are
included in GDP?
a. the value of unpaid housework
b. the value of services provided by major household appliances purchased in a
previous period
c. the estimated rental value of owner-occupied homes
d. All of the above are included in GDP.
In the U.S. a delivery van costs $30,000. In Uruguay the same delivery van costs
720,000 pesos. The nominal exchange rate is 20 pesos per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the television cheaper?
When the price level falls
a. households want to lend more, so the interest rate rises making the quantity of goods
and services demanded rise.
b. households want to lend more, so the interest rate falls, making the quantity of goods
and services demanded rise.
c. households want to lend more, so the interest rate rises, making the quantity of goods
and services demanded fall.
d. None of the above are correct.
Figure 35-2
Use the pair of diagrams below to answer the following questions.
RefertoFigure35-2. If the economy starts at C and 1, then in the short run, an increase
in government expenditures moves the economy to
a. B and 2.
b. B and 3.
c. B and 3.
d. None of the above is correct.
Which of the following is nota nonsensical headline?
a. British perpetuities about to mature.
b. Disney issues new bonds with term of 7 percent.
c. Corporate bonds currently pay higher interest rates than government bonds.
d. Standard and Poor’s judges new junk bond to have very low credit risk.
The fact that borrowers sometimes default on their loans by declaring bankruptcy is
directly related to the characteristic of a bond called
a. credit risk.
b. interest risk.
c. term risk.
d. private risk.
A bond that never matures is known as a
a. perpetuity.
b. an intermediary bond.
c. an indexed bond.
d. a junk bond.
The government purchases component of GDP includes salaries paid to soldiers but not
Social Security benefits paid to the elderly.
a. True
b. False
Almost nine-tenths of all spells of unemployment end when the unemployed person
finds a job.
a. True
b. False
If nominal GDP is $10,000 and real GDP is $8,000, then the GDP deflator is 125.
a. True
b. False
An economy’s natural rate of unemployment is the
a. economy’s longrun target level of unemployment.
b. amount of unemployment that the economy normally experiences.
c. lowest rate of unemployment the economy can achieve.
d. All of the above are correct.
How is net national product (NNP) calculated?
a. Saving is added to the total income of a nation’s citizens.
b. Saving is added to the total income earned within a nation.
c. Depreciation losses are subtracted from the total income of a nation’s citizens.
d. Depreciation losses are subtracted from the total income earned within a nation.
The money demand curve shifts to the left when the Fed buys government bonds.
a. True
b. False
In a simple circular-flow diagram,
a. households spend all of their income.
b. all goods and services are bought by households.
c. expenditures flow through the markets for goods and services, while income flows
through the markets for the factors of production.
d. All of the above are correct.
Which of the following is nota determinant of the demand for a particular good?
a. the prices of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good
Assume the MPCis 0.72. The multiplier is
a. 4.53.
b. 1.39.
c. 2.57.
d. 3.57.
Which of the following statements is correct?
a. Stocks, bonds, and deposits are all similar in that each provides a common medium
of exchange.
b. Most buyers of stocks and bonds prefer those issued by large and familiar companies.
c. Banks charge borrowers a slightly lower interest rate than they pay to depositors.
d. None of the above is correct.