Economists use the word “money” to refer to
a. income generated by the production of goods and services.
b. those assets regularly used to buy goods and services.
c. financial assets such as stocks and bonds.
d. any type of wealth.
Table 3-22
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
RefertoTable3-22.Zimbabwe has an absolute advantage in the production of
a. toothbrushes and a comparative advantage in the production of toothbrushes.
b. toothbrushes and a comparative advantage in the production of hairbrushes.
c. hairbrushes and a comparative advantage in the production of toothbrushes.
d. hairbrushes and a comparative advantage in the production of hairbrushes.
Which of the following is an example of a positive, as opposed to normative,
statement?
a. Inflation is more harmful to the economy than unemployment is.
b. If welfare payments increase, the world will be a better place.
c. Prices rise when the government prints too much money.
d. When public policies are evaluated, the benefits to the economy of improved equality
should be considered more important than the costs of reduced efficiency.
A farmer has the ability to grow either corn or cotton or some combination of the two.
Given no other information, it follows that the farmer’s opportunity cost of a bushel of
corn multiplied by his opportunity cost of a bushel of cotton
a. is equal to 0.
b. is between 0 and 1.
c. is equal to 1.
d. is greater than 1.
For the U.S. economy, the most important reason for the downward slope of the
aggregate-demand curve is the interest-rate effect.
a. True
b. False
When quantity supplied increases at every possible price, we know that the supply
curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the supply curve to a new point on the same
curve.
d. not shifted; rather, the supply curve has become flatter.
Two countries are the same, except one is poorer. Assuming the traditional assumption
about the production function is made there are
a. diminishing returns to capital so the poor country grows slower.
b. increasing returns to capital so the poor country grows slower.
c. diminishing returns to capital so the poor country grows faster.
d. increasing returns to capital so the poor country grows faster.
A country has national saving of $100 billion, government expenditures of $30 billion,
domestic investment of $80 billion, and net capital outflow of $20 billion. What is its
demand for loanable funds?
a. $60 billion
b. $70 billion
c. $100 billion
d. $120 billion
In general, as a person includes fewer stocks and more bonds in his portfolio,
a. both risk and expected return rise.
b. risk rises but expected return falls.
c. risk falls, but expected return rises.
d. both risk and expected return fall.
In a closed economy, private saving is
a. the amount of income that households have left after paying for their taxes and
consumption.
b. the amount of income that businesses have left after paying for the factors of
production.
c. the amount of tax revenue that the government has left after paying for its spending.
d. always equal to investment.
According to 2012 data on the U.S. population, which of the following groups of adults
of prime working age (ages 25-54) had the lowest unemployment rate?
a. white males
b. white females
c. black males
d. black females
Suppose the economy is closed and consumption is 8 million, taxes are 2 million, and
government purchases are 1.75 million. If national saving amounts to 1.25 million, then
what is GDP?
a. 9 million.
b. 9.5 million.
c. 13 million.
d. 11 million.
The nominal exchange rate is 32 Russian rubles per dollar. The price of a bushel of
wheat is 260 rubles in Russia and $7 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to B is yes, where would arbitragers buy and where would they sell.
ZZL Corporation has the opportunity to undertake an investment project that will cost
$20,000 today. If the interest rate is 20 percent and if the project will yield the company
$30,000 in 3 years, then ZZL will undertake the project.
a. True
b. False
The nation’s antitrust laws are enforced by economists at the Department of
a. Labor.
b. Health and Human Services.
c. Justice.
d. Treasury.
As the price level falls
a. people will want to hold more money, so the interest rate rises.
b. people will want to hold more money, so the interest rate falls.
c. people will want to hold less money, so the interest rate falls.
d. people will want to hold less money, so the interest rate rises.
“When workers already have a large quantity of capital to use in producing goods and
services, giving them an additional unit of capital increases their productivity only
slightly.” This statement
a. represents the traditional view of the production process.
b. is an assertion that capital is subject to diminishing returns.
c. is made under the assumption that the quantities of human capital, natural resources,
and technology are being held constant.
d. All of the above are correct.
Which of the following counts as part of the supply of loanable funds?
a. bank deposits and purchases of bonds
b. bank deposits but not purchases of bonds
c. purchases of bonds but not bank deposits
d. neither purchases of bonds nor bank deposits
If buyers today become more willing and able than before to purchase larger quantities
of stand up paddle boards (SUPs) at each price of SUPs, then
a. we will observe a movement downward and to the right along the demand curve for
SUPs.
b. we will observe a movement upward and to the left along the demand curve for
SUPs.
c. the demand curve for SUPs will shift to the right.
d. the demand curve for SUPs will shift to the left.
An increase in demand will cause an increase in price, which will cause an increase in
quantity supplied.
a. True
b. False
Figure 2-16
Refer to Figure2-16. Taking cause and effect into account, which of the following
interpretations would be most reasonable regarding the relationship between coffee and
hours without sleep?
a. The less coffee a person drinks per day, the more time he can go without sleep.
b. There is no relationship between how much coffee per day a person drinks and how
long he can go without sleep.
c. The more coffee a person drinks per day, the more time he can go without sleep.
d. The more coffee a person drinks per day, the less time he can go without sleep.
The Stock Market Boom of 2015
Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise
more than expected and stay high for some time.
RefertoStockMarketBoom2015.How is the new long-run equilibrium different from
the original one?
a. the price level and real GDP are higher
b. the price level and real GDP are lower.
c. the price level is higher and real GDP is the same.
d. the price level is the same and real GDP is higher.
Examples of graphs of a single variable include pie charts, bar graphs, and time-series
graphs.
a. True
b. False
Which of the following involves financial intermediation?
a. a bank makes a loan
b. a household buys stock issued by a corporation
c. a foreign government purchases U.S. government bonds
d. All of the above are correct.
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.
If a central bank were required to target inflation at zero, then when there was a
negative aggregate supply shock the central bank
a. would have to increase the money supply. This would move unemployment closer to
the natural rate.
b. would have to increase the money supply. This would move unemployment further
from the natural rate.
c. would have to decrease the money supply. This would move unemployment closer to
the natural rate.
d. would have to decrease the money supply. This would move unemployment further
from the natural rate.
Consider three imaginary countries. In Aire, saving amounts to $4,000 and consumption
amounts to $12,000; in Bovina, saving amounts to $3,000 and consumption amounts to
$24,000; and in Cartar, saving amounts to $10,000 and consumption amounts to
$50,000. The saving rate is
a. higher in Aire than in Cartar, and it is higher in Cartar than in Bovina.
b. higher in Cartar than in Aire, and it is higher in Aire than in Bovina.
c. higher in Cartar than in Bovina, and it is the same in Bovina and Aire.
d. higher in Aire than in Bovina, and it is the same in Aire and Cartar.
Which of the following would cause the price level to fall and output to rise in the short
run?
a. an increase in the money supply
b. a decrease in the money supply
c. an adverse supply shock
d. a favorable supply shock
Which of the following implies that an increase in the money supply growth rate
permanently changes the unemployment rate?
a. both the long-run aggregate supply curve and the long-run Phillips curve
b. the long-run aggregate supply curve, but not the long-run Phillips curve
c. the long-run Phillips curve, but not the long-run aggregate supply curve
d. neither the long-run Phillips curve nor the long-run aggregate supply curve
Which of the following statements about inflation is correct?
a. Evidence from studies indicates that, in U.S. newspapers, inflatiois mentioned less
frequently than other economic terms, such as unemploymentand productivity.
b. People believe the inflation fallacy because they tend to believe too strongly in the
principle of monetary neutrality.
c. Nominal incomes are determined by nominal factors; they are not affected by real
factors.
d. Inflation does not in itself reduce people’s real purchasing power.
The theory of purchasing-power parity primarily explains
a. why trade deficits tend to move to zero over time.
b. how foreign prices affect domestic prices.
c. the determination of the real exchange rate.
d. why a change in the real exchange rate changes a country’s net exports.