Which of the following would tend to shift the supply of dollars in the market for
foreign-currency exchange in the open-economy macroeconomic model to the right?
a. The exchange rate rises.
b. The exchange rate falls.
c. The expected rate of return on U.S. assets rises.
d. The expected rate of return on U.S. assets falls.
Figure 4-3
Consumer 1 Consumer 2
Refer to Figure 4-3. If these are the only two consumers in the market, then the market
quantity demanded at a price of $6 is
a. 12 units.
b. 14 units.
c. 19 units.
d. 21 units.
If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $2 in the U.S.
and 6 pesos in Argentina what is the real exchange rate?
a. 3
b. 4/3
c. 3/4
d. 1/3
If the nominal interest rate is 4 percent and the real interest rate is -2.5 percent, then the
inflation rate is
a. -6.5 percent.
b. -1.5 percent.
c. 1.5 percent.
d. 6.5 percent.
In a 2007 New York Times article Paul Krugman wrote that
a. the infant-industry argument works well as an argument in favor of protection for the
U.S. steel industry.
b. the negative effects of third world exports on U.S. wages may be increasing.
c. there are social gains to the U.S. from free trade.
d. high wage countries account for a growing share of U.S. imports of manufactured
goods.
The reserve requirement is 10%. Lucy deposits $200 into a bank. By how much do
excess reserves change?
a. $200
b. $180
c. $20
d. $10
Which of the following statements is correct?
a. A large, well-known corporation such as Intel generally would use financial
intermediation to finance expansion of its facilities.
b. On average, managed funds outperform indexed funds.
c. Unlike corporate bonds and stocks, checking accounts are a medium of exchange.
d. A mutual fund is a financial market.
Figure 4-14
Refer to Figure 4-14. At a price of
a. $8, there is a surplus of 6 units.
b. $5, there is neither a shortage nor a surplus.
c. $2, there is a shortage of 6 units.
d. All of the above are correct.
Table 3-14
The following table contains some production possibilities for an economy for a given
year.
Refer to Table 3-14. If the production possibilities frontier is bowed outward, then “?”
could be
a. 340.
b. 330.
c. 320.
d. 310.
Recently the Greek government had large deficits and people became worried about
Greece’s ability to continue to make payments on its debt. Which of the these events
raise a country’s interest rates?
a. an increase in the budget deficit, and increased concerns about the ability of the
government to pay back its debt
b. an increase in the budget deficit, but not increased concerns about the ability of the
government to pay back its debt
c. increased concerns about the ability of the government to pay back its debt, but not
an increase in the budget deficit
d. neither an increase in the budget deficit, nor increased concerns about the ability of
the government to pay back its debt
Which of the following methods of picking stocks is not consistent with fundamental
analysis?
a. doing research such as thoroughly reading and analyzing companies’ annual reports
b. choosing mutual funds that are managed by individuals with good reputations
c. viewing individual stock prices as unpredictable
d. relying upon the advice of Wall Street analysts
In the open-economy macroeconomic model, a higher U.S. real exchange rate makes
a. U.S. goods more expensive relative to foreign goods and reduces the quantity of
dollars supplied.
b. U.S. goods more expensive relative to foreign goods and reduces the quantity of
dollars demanded.
c. foreign goods more expensive relative to U.S. goods and reduces the quantity of
dollars supplied.
d. foreign goods more expensive relative to U.S. goods and reduces the quantity of
dollars demanded.
Figure 19-6
Refer to Figure 19-6. Which of the following shifts show the effects of an import
quota?
a. shifting the middle supply curve in panel c to the one to its left.
b. shifting the demand curve from the right to the left in panel c.
c. shifting the demand curve from the left to the right in panel c.
d. None of the above is correct.
Suppose investment spending falls. To offset the change in output the Federal Reserve
could
a. increase the money supply. This increase would also move the price level closer to its
value before the decline in investment spending.
b. increase the money supply. However, this increase would move the price level farther
from its value before the decline in investment spending.
c. decrease the money supply. This decrease would also move the price level closer to
its value before the decline in investment spending.
d. decrease the money supply. However, this increase would move the price level
farther from its value before the decline in investment spending.
The Fed has the power to increase or decrease the number of dollars in the economy
through the decisions of
a. the Board of Governors.
b. the FOMC.
c. the regional Federal Reserve Bank presidents.
d. the U.S. Treasury.
If stock prices follow a random walk, it means
a. long periods of declining prices are followed by long periods of rising prices.
b. the greater the number of consecutive days of price declines, the greater the
probability prices will increase the following day.
c. stock prices are unrelated to random events that shock the economy.
d. stock prices are just as likely to rise as to fall at any given time.
Figure 2-10
Refer to Figure 2-10. Which of the following events would explain the shift of the
production possibilities frontier from A to B?
a. The economy’s citizens developed an enhanced taste for books.
b. The economy experienced a technological advance in the production of books.
c. More capital became available in the economy.
d. More labor became available in the economy.
Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland
has had an inflation rate of 25% for many years.
Refer to Monetary Policy in Southland. Suppose that the Southland Department of
Finance has run a public relations campaign claiming it will reduce inflation to 12.5%
but it actually raises inflation to 30%. Suppose that the public had expected that the
Department of Finance would reduce inflation but only to 22%. Then
a. unemployment falls, but it would have fallen less if people had been expecting 5%
inflation.
b. unemployment falls, but it would have fallen less if people had been expecting 25%
inflation.
c. unemployment rises, but it would have risen less if people had been expecting 5%
inflation.
d. unemployment rises, but it would have risen less if people had been expecting 25%
inflation.
Figure 6-25
Panel (a) Panel (b)
Panel (c)
Refer to Figure 6-25. In which market will the tax burden be most equally divided
between buyers and sellers?
a. market (a)
b. market (b)
c. market (c)
d. All of the above are correct.
Suppose that the money supply increases. In the short run, this increases prices
according to
a. both the short-run Phillips curve and the aggregate demand and aggregate supply
model.
b. neither the short-run Phillips curve nor the aggregate demand and aggregate supply
model.
c. the short-run Phillips curve, but not the aggregate demand and aggregate supply
model.
d. the aggregate demand and aggregate supply model but not the short-run Phillips
curve.
A movement to the left along a given short-run Phillips curve could be caused by
a. a reduction in the natural rate of unemployment or expansionary monetary policy.
b. expansionary monetary policy, but not a reduction in the natural rate of
unemployment.
c. either a reduction in the natural rate of unemployment or a contractionary monetary
policy.
d. contractionary monetary policy, but not a reduction in the natural rate of
unemployment.
Suppose scientists provide evidence that chocolate pudding increases the bad
cholesterol levels of those who eat it. We would expect to see
a. no change in the demand for chocolate pudding.
b. a decrease in the demand for chocolate pudding.
c. an increase in the demand for chocolate pudding.
d. a decrease in the supply of chocolate pudding.
Figure 4-10
Refer to Figure 4-10. Which of the following would cause the supply curve to shift
from Supply B to Supply A in the market for tennis racquets?
a. a decrease in the price of tennis balls
b. an expectation by firms that the price of tennis racquets will increase in the very near
future
c. a decrease in the price of tennis racquet strings
d. an improvement in technology that allows firms to use less labor in the production of
tennis racquets
There was hyperinflation during the
a. period 1880-1896 in the United States.
b. 1970s in the United States.
c. early part of the current century in Zimbabwe.
d. All of the above are correct.
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.
In the equation,
Unemployment rate = Natural rate of unemployment – a ctual inflation – Expected
inflation),
the variable a is a parameter that measures how much
a. actual inflation responds to expected inflation.
b. expected inflation responds to actual inflation.
c. the natural rate of unemployment responds to unexpected inflation.
d. actual unemployment responds to unexpected inflation.
If businesses and consumers become pessimistic, the Federal Reserve can attempt to
reduce the impact on the price level and real GDP by
a. increasing the money supply, which raises interest rates.
b. increasing the money supply, which lowers interest rates.
c. decreasing the money supply, which raises interest rates.
d. decreasing the money supply, which lowers interest rates.
If the demand curve and the supply curve for a good are straight lines, then the
deadweight loss that results from a tariff is represented on the supply-and-demand
graph by
a. the area of one triangle.
b. the area of one rectangle.
c. the combined areas of two different triangles.
d. the combined areas of two different rectangles.
Figure 3-10
Alice and Betty’s Production Possibilities in one 8-hour day.
Alice’s Production Possibilities Frontier Betty’s Production Possibilities Frontier
Refer to Figure 3-10. If point A represents Alice’s current production and point B
represents Betty’s current production, under what circumstances can both Alice and
Betty benefit from specialization and trade?
a. Alice produces more pizzas and Betty produces more lemonade.
b. Alice produces more lemonade and Betty produces more pizzas.
c. Both Alice and Betty produce only pizzas.
d. There are no circumstances under which both Alice and Betty can benefit from
specialization and trade.
Table 7-2
This table refers to five possible buyers’ willingness to pay for a case of Vanilla Coke.
Refer to Table 7-2. If the price of Vanilla Coke is $6.90, who will purchase the good?
a. all five individuals
b. Megan, Mallory and Audrey
c. David, Laura and Megan
d. David and Laura
The dictator of a certain country requires that companies planning to open or expand
must pay a large fee to file an application one year prior to building new factories or
expanding existing ones. Other things the same, in the long run this requirement would
a. reduce real GDP per person and productivity.
b. reduce real GDP per person but not productivity.
c. reduce productivity but not real GDP per person.
d. None of the above is correct.
Any item that people can use to transfer purchasing power from the present to the future
is called
a. a medium of exchange.
b. a unit of account.
c. a store of value.
d. None of the above is correct.
A survey of professional economists revealed that more than three-fourths of them
agreed with fourteen economic propositions. Which of the following is not one of those
propositions?
a. A ceiling on rents reduces the quantity and quality of housing available.
b. Fiscal policy has a significant stimulative impact on a less than fully employed
economy.
c. The gap between Social Security funds and expenditures will become unsustainably
large within the next fifty years if current policies remain unchanged.
d. The United States should implement universal health care for its citizens.
Discouraged workers are people who want to work but have given up trying to find a
job after an unsuccessful search.
What’s the difference between firm-specific risk and market risk? Will diversification
eliminate one or both? Explain.
Inflation necessarily distorts saving when either real interest income or nominal interest
income is taxed.
The overall effect of accounting for purchases of foreign goods in GDP reduces GDP.
Compare the Board of Governors and the Federal Open Market Committee.
If a nation is selling more goods and services to foreigners than it is buying from them,
then on net it must be buying assets abroad.
In most of the 1970s, the Fed’s policy created expectations of high inflation.
The GDP deflator reflects the prices of all goods and services produced around the
world, whereas the consumer price index reflects the prices of all goods and services
bought by consumers.
Adam Smith wrote that a person should never attempt to make at home what it will cost
him more to make than to buy.
If a major union goes on strike, then the country would be operating inside its
production possibilities frontier.
Because of differences in tax treatment, municipal bonds pay a higher interest rate than
do corporate bonds.
An increase in the price of a substitute good will shift the demand curve for a good to
the right.
Choosing not to attend a concert so that you can study for your exam is an example of a
tradeoff.
Unemployment insurance is designed to offer workers full protection against job loss.
The optimal tax is difficult to determine because although revenues rise and fall as the
size of the tax increases, deadweight loss continues to increase.