When a Japanese auto maker opens a factory in the U.S., U.S. net capital outflow
a. increases because the foreign company makes a portfolio investment in the U.S.
b. declines because the foreign company makes a portfolio investment in the U.S.
c. increases because the foreign company makes a direct investment in capital in the
U.S.
d. declines because the foreign company makes a direct investment in capital in the
U.S.
Collective bargaining refers to
a. the process by which the government sets exemptions from the minimum wage law.
b. setting the same wage for all employees to prevent conflict among workers.
c. firms colluding to set the wages of employees below equilibrium.
d. the process by which unions and firms agree on the terms of employment.
Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are
500. What value of government purchases would make national savings equal to 2,000
and at that value would the government have a deficit or surplus?
a. 1,500, deficit
b. 1,500, surplus
c. 1,000, deficit
d. 1,000, surplus
Eliminating double-taxation would likely
a. raise saving and primarily benefit people with lower incomes.
b. raise saving but primarily benefit people with higher incomes.
c. reduce saving but primarily benefit people with lower incomes.
d. reduce saving and primarily benefit people with higher income.
An economy’s production possibilities frontier is also its consumption possibilities
frontier
a. under all circumstances.
b. under no circumstances.
c. when the economy is self-sufficient.
d. when the rate of tradeoff between the two goods being produced is constant.
As the number of stocks in a person’s portfolio increases,
a. the risk of the portfolio increases, as indicated by the increasing value of the standard
deviation of the portfolio.
b. the risk of the portfolio increases, as indicated by the decreasing value of the standard
deviation of the portfolio.
c. the risk of the portfolio decreases, as indicated by the increasing value of the standard
deviation of the portfolio.
d. the risk of the portfolio decreases, as indicated by the decreasing value of the
standard deviation of the portfolio.
Dilbert’s Incorporated produced 5,000,000 units of accounting software in 2010. At the
start of 2011 the pointy haired boss reduced total annual hours of employment from
10,000 to 8,000 and production was 4,800,000. These numbers indicate that
productivity
a. fell by 4%.
b. fell by 20%.
c. rose by 12%.
d. rose by 20%.
An associate professor of physics gets a $200 a month raise. She figures that with her
new monthly salary she can buy more goods and services than she could buy last year.
a. Her real and nominal salary have risen.
b. Her real and nominal salary have fallen.
c. Her real salary has risen and her nominal salary has fallen.
d. Her real salary has fallen and her nominal salary has risen.
According to the assumptions of the quantity theory of money, if the money supply
increases 5 percent, then
a. both the price level and nominal GDP would rise by 5 percent.
b. the price level would rise by 5 percent and nominal GDP would be unchanged.
c. the price level would be unchanged and nominal GDP would rise by 5 percent.
d. both the price level and nominal GDP would be unchanged.
According to the efficient markets hypothesis, which of the following would increase
the price of stock in the Simpson Corporation?
a. Simpson announces, just as everyone had expected, that it has hired a new highly
respected CEO.
b. Simpson announces that its profits were low, but not as low as the market had
expected.
c. Analysis by a column in a business weekly indicates that Simpson is overvalued.
d. All of the above would increase the price.
For a given real interest rate, an increase in inflation makes the after-tax real interest
rate
a. decrease, which encourages savings.
b. decrease, which discourages savings.
c. increase, which encourages savings.
d. increase, which discourages savings.
Table 28-3
2009 Labor Data for Baltivia
RefetoTable28-3.What was Baltivia’s laborforce participation rate in 2009?
a. 55%
b. 63%
c. 66.9%
d. 87.3%
A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its
inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S.
construction company. In which quarter(s) does(do) these transactions raise investment?
a. the first and the second
b. the first but not the second
c. the second but not the first
d. neither the first nor the second
In 2012 the federal debt was about
a. 11.3 trillion
b. 9.3 trillion
c. 1.13 trillion
d. 930 billion
When we move along a given demand curve,
a. only price is held constant.
b. income and price are held constant.
c. all nonprice determinants of demand are held constant.
d. all determinants of quantity demanded are held constant.
Table 3-12
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim
can switch between setting up and testing computers at a constant rate. The following
table applies.
Refer to Table3-12. Which of the following points would notbe on Barb’s production
possibilities frontier, based on a 40-hour week?
a. (0 computers set up, 40 computers tested)
b. (8 computers set up, 32 computers tested)
c. (25 computers set up, 20 computers tested)
d. (30 computers set up, 16 computers tested)
Critics of active monetary and fiscal policy emphasize
a. that policy affects the economy with a lag and our ability to forecast future economic
conditions is poor.
b. “leaning against the wind” of economic change to stabilize the economy.
c. cutting government spending, raising taxes, and reducing the money supply when
aggregate demand is excessive.
d. boosting government spending, lowering taxes, and increasing the money supply
when aggregate demand is low.
According to liquidity preference theory,
a. an increase in the interest rate reduces the quantity of money demanded. This is
shown as a movement along the money-demand curve. An increase in the price level
shifts money demand to the right.
b. an increase in the interest rate increases the quantity of money demanded. This is
shown as a movement along the money-demand curve. An increase in the price level
shifts money demand leftward.
c. an increase in the price level reduces the quantity of money demanded. This is shown
as a movement along the money-demand curve. An increase in the interest rate shifts
money demand rightward.
d. an increase in the price level increases the quantity of money demanded. This is
shown as a movement along the money-demand curve. An increase in the interest rate
shifts money demand leftward.
If a country experiences capital flight, which curves shift right?
a. the demand for loanable funds and the demand for its currency in the market for
foreign-currency exchange
b. the demand for loanable funds and the supply of its currency in the market for
foreign-currency exchange
c. the supply of loanable funds and the demand for its currency in the market for
foreign-currency exchange
d. the supply of loanable funds and the supply of its currency in the market for
foreign-currency exchange
Which of the following could explain an increase in the interest rate and 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.
If the minimum wage is currently above the equilibrium wage, then a decrease in the
minimum wage
a. increases both the quantity demanded and the quantity supplied of labor.
b. decreases both the quantity demanded and the quantity supplied of labor.
c. increases the quantity of labor demanded but decreases the quantity of labor supplied.
d. decreases the quantity of labor demanded but increases the quantity of labor supplied.
The process by which unions and firms agree on the terms of employment is called
collective bargaining.
a. True
b. False
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.
Eliminating means requirements for government benefits would
a. raise saving and primarily benefit people with lower incomes.
b. raise saving but primarily benefit people with higher incomes.
c. reduce saving but primarily benefit people with lower incomes.
d. reduce saving and primarily benefit people with higher income.
According to purchasing-power parity, inflation in the U.S. causes the dollar to
a. depreciate relative to all other currencies.
b. depreciate relative to currencies of countries that have lower inflation rates.
c. appreciate relative to all other countries.
d. appreciate relative to currencies of countries that have lower inflation rates.
Purchasing-power parity implies that the nominal exchange rate given as foreign
currency per unit of U.S. currency must rise if the price level(s) in
a. foreign countries rise.
b. the United States rises.
c. all countries rise.
d. all countries fall.
Scenario 26-2. Assume the following information for an imaginary, closed economy.
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion;
and taxes = $0.9 trillion.
RefertoScenario26-2.Suppose, for this economy, the relationship between the real
interest rate, , and investment, I, is given by the equation I= 10.78 ” 3.03.(If, for
example, = 10, this means that the real interest rate is 10 percent.) The equilibrium real
interest rate for this economy is
a. 3.19 percent.
b. 3.00 percent.
c. 3.16 percent.
d. 7.14 percent.
Which of the following decreases in response to the interest-rate effect from an increase
in the price level?
a. both investment and consumption
b. consumption but not investment
c. investment but not consumption
d. neither investment nor consumption
When the real exchange rate for the dollar depreciates, U.S. goods become
a. less expensive relative to foreign goods, which makes exports rise and imports fall.
b. less expensive relative to foreign goods, which makes exports fall and imports rise.
c. more expensive relative to foreign goods, which makes exports rise and imports fall.
d. more expensive relative to foreign goods, which makes exports fall and imports rise.
According to purchasing-power parity, if the price of a basket of goods in the U.S. rose
from $1,500 to $2,000 and the price of the same basket of goods rose from 600 units of
some other country’s currency to 1,000 units of that country’s currency, then the
a. nominal exchange rate would appreciate.
b. nominal exchange rate would depreciate.
c. real exchange rate would appreciate.
d. real exchange rate would depreciate.