Money
a. is more efficient than barter.
b. makes trades easier.
c. allows greater specialization.
d. All of the above are correct.
The market for diamond rings is closely linked to the market for high-quality diamonds.
If a large quantity of high- quality diamonds enters the market, then the
a. supply curve for diamond rings will shift right, which will create a shortage at the
current price. Price will increase, which will decrease quantity demanded and increase
quantity supplied. The new market equilibrium will be at a higher price and higher
quantity.
b. supply curve for diamond rings will shift right, which will create a surplus at the
current price. Price will decrease, which will increase quantity demanded and decrease
quantity supplied. The new market equilibrium will be at a lower price and higher
quantity.
c. demand curve for diamond rings will shift right, which will create a shortage at the
current price. Price will increase, which will decrease quantity demanded and increase
quantity supplied. The new market equilibrium will be at a higher price and higher
quantity.
d. demand curve for diamond rings will shift right, which will create a surplus at the
current price. Price will decrease, which will increase quantity demanded and decrease
quantity supplied. The new market equilibrium will be at a lower price and higher
quantity.
Jim buys a $1000 bond from ABC Company. ABC Company uses the $1000 to
purchase a new piece of machinery. Whose spending would be an act of investment in
the language of macroeconomics?
a. only Jim’s
b. only ABC Corporation’s
c. Jim’s and ABC Corporation’s
d. neither Jim’s nor ABC Corporation’s
Which two groups of decision makers are included in the simple circular-flow diagram?
a. markets and government
b. households and government
c. firms and government
d. households and firms
Which of the following is notassociated with an adverse supply shock?
a. the short-run Phillips curve shifts left
b. unemployment rises
c. the price level rises
d. output falls
Sari puts $100 into an account with an interest rate of 10 percent. According to the rule
of 70, about how much does she have at the end of 21 years?
a. $210
b. $300
c. $800
d. $1,010
Camp Company had total earnings of $600 million in 2013, out of which it retained 20
percent for future investments. In 2013, its stock featured a dividend yield of 4 percent
and 100 million shares were outstanding. The price-earnings ratio for Camp Company
stock was
a. 5.
b. 150.
c. 20.
d. 25.
People choose to hold a larger quantity of money if
a. the interest rate rises, which causes the opportunity cost of holding money to rise.
b. the interest rate falls, which causes the opportunity cost of holding money to rise.
c. the interest rate rises, which causes the opportunity cost of holding money to fall.
d. the interest rate falls, which causes the opportunity cost of holding money to fall.
Figure 3-18
Refer to Figure3-18. If Bintu and Juba switch from each person dividing her time
equally between the production of cups and bowls to each person spending all of her
time producing the good in which she has a comparative advantage, then total
production will increase by
a. 1 bowl and 1 cup.
b. 2 bowls and 4 cups.
c. 3 bowls and 5 cups.
d. 4 bowls and 8 cups.
Lucretia puts $400 into an account when the interest rate is 10 percent. Later she checks
her balance and finds it’s worth about $708.62. How many years did she wait to check
her balance?
a. 5 years
b. 6 years
c. 7 years
d. 8 years
A shock increases the costs of production. Given the effects of this shock, if the central
bank wants to return the unemployment rate towards its previous level it would
a. increase the rate at which the money supply increases. This will also move inflation
closer to its previous rate..
b. increase the rate at which the money supply increases. However, this will make
inflation higher than its previous rate
c. decrease the rate at which the money supply increases. This will also move inflation
closer to its original rate
d. decrease the rate at which the money supply increases. However, this will make
higher than its previous rate.
A country experiencing a growth rate of 12% per year can go from being one of the
poorest to one of the richest in
a. one generation. In the last couple of decades China’s growth rate has been higher than
12%.
b. one generation. However, in the last couple of decades not even China’s growth rate
has been this high.
c. three generations. In the last couple of decades China’s growth rate has been higher
than 12%.
d. three generations. However, in the last couple of decades not even China’s growth
rate has been this high.
If the dollar buys fewer bananas in Guatemala than in Honduras, then traders could
make a profit by
a. buying bananas in Honduras and selling them in Guatemala, which would tend to
raise the price of bananas in Honduras.
b. buying bananas in Honduras and selling them in Guatemala, which would tend to
raise the price of bananas in Guatemala.
c. buying bananas in Guatemala and selling them in Honduras, which would tend to
raise the price of bananas in Guatemala.
d. buying bananas in Guatemala and selling them in Honduras, which would tend to
raise the price of bananas in Honduras.
Figure 4-16
RefertoFigure4-16. The shift from S to S” in the market for peaches could be caused
by a(n)
a. increase in the price of peaches.
b. decrease in the price of pears.
c. increase in income.
d. decrease in the labor costs of the workers who pick peaches.
For a closed economy, GDP is $12 trillion, consumption is $7 trillion, taxes net of
transfers are $3 trillion and the government runs a deficit of $1 trillion. What are private
saving and national saving?
a. $5 trillion and $3 trillion, respectively
b. $5 trillion and $1 trillion, respectively
c. $2 trillion and $3 trillion, respectively
d. $2 trillion and $1 trillion, respectively
A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal
exchange rate is 6.75 yuan per dollar. The real exchange rate is
a. 1.106. If purchasing-power parity held the nominal exchange rate would be higher.
b. 1.106. If purchasing-power parity held the nominal exchange rate would be lower.
c. .904. If purchasing power parity held the nominal exchange rate would be higher.
d. .904. If purchasing-power parity held the nominal exchange rate would be lower.
Figure 2-6
RefertoFigure2-6. The opportunity cost of this economy moving from point I to point
H is
a. 120 pillows.
b. 120 blankets.
c. 120 blankets and 120 pillows.
d. 200 blankets.
When the Fed decreases the discount rate, banks will
a. borrow more from the Fed and lend more to the public. The money supply increases.
b. borrow more from the Fed and lend less to the public. The money supply decreases.
c. borrow less from the Fed and lend more to the public. The money supply increases.
d. borrow less from the Fed and lend less to the public. The money supply decreases.
Suppose the interest rate is 5 percent. Which of the following payment options has the
highestpresent value today?
a. $550 one year from today.
b. $580 two years from today.
c. $600 three years from today.
d. $615 four years from today.
When a country keeps its workers as fully employed as possible, it achieves a higher
level of GDP than if many of its workers were idle.
a. True
b. False
France has a higher natural rate of unemployment than the United States. This suggests
that
a. France is at a higher point on its long-run Phillips curve and so has higher inflation
than the United States.
b. France is at a lower point on its long-run Phillips curve and so has lower inflation
than the United States.
c. France’s Phillips curve is to the left of that of the United States, possibly because they
have higher inflation.
d. France’s Phillips curve is to the right of that of the United States, possibly because
they have more generous unemployment compensation.
If the real exchange rate is greater than 1, then the
a. nominal exchange rate x U.S. price > foreign price. The dollars required to purchase
a good in the U.S. would buy more than enough foreign currency to buy the same good
overseas.
b. nominal exchange rate x U.S. price > foreign price. The dollars required to purchase
a good in the U.S. would not buy enough foregoing currency to buy the same good
overseas.
c. nominal exchange rate x U.S. price < foreign price. The dollars required to purchase
a good in the U.S. would buy more than enough foreign currency to buy the same good
overseas.
d. nominal exchange rate x U.S. price < foreign price. The dollars required to purchase
a good in the U.S. would not buy enough foreign currency to buy the same good
overseas.
When job search is the explanation for unemployment, workers are searching for the
jobs that best suit their tastes and skills, but when the wage is above the equilibrium
level, the quantity of labor supplied exceeds the quantity of labor demanded, and
workers are unemployed because they are waiting for jobs to open up.
a. True
b. False
A competitive market is one in which there
a. is only one seller, but there are many buyers.
b. are many sellers, and each seller has the ability to set the price of his product.
c. are many sellers, and they compete with one another in such a way that some sellers
are always being forced out of the market.
d. are so many buyers and so many sellers that each has a negligible impact on the price
of the product.
Supply-side economists believe that a reduction in the tax rate
a. always decrease government tax revenue.
b. shifts the aggregate supply curve to the right.
c. provides no incentive for people to work more.
d. would decrease consumption.
Suppose that over the past year, the real interest rate was 3 percent, the CPI was 126.2
at the beginning of the year, and the CPI was 129.5 at the end of the year. It follows that
a. the dollar value of savings increased at 5.6 percent, and the purchasing power of
savings increased at 3 percent.
b. the dollar value of savings increased at 0.4 percent, and the purchasing power of
savings increased at 3 percent.
c. the dollar value of savings increased at 3 percent, and the purchasing power of
savings increased at 5.6 percent.
d. the dollar value of savings increased at 3 percent, and the purchasing power of
savings increased at 0.4 percent.
Goods produced abroad and sold domestically are called
a. exports.
b. imports.
c. exchange rates.
d. opportunity costs.
A candidate for political office announces the following policies which, he says,
economics clearly demonstrates will lead to higher output in the long run: 1. increase
immigration from abroad 2. make trade more open between the US and other countries.
a. 1 and 2 both shift long-run aggregate supply right.
b. 1 and 2 both shift long-run aggregate supply left.
c. 1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left.
d. 1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.
Figure 2-16
Referto Figure 2-16. Cups of coffee per day and the hours that someone can go
without sleep appear to have
a. a positive correlation.
b. a negative correlation.
c. a random correlation.
d. no correlation.
If the nominal interest rate is 5 percent and the rate of inflation is 9 percent, then the
real interest rate is
a. -4 percent.
b. -0.44 percent.
c. 4 percent.
d. 14 percent.
A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy.
Borrowing for which warehouse(s) is included in the demand for loanable funds in the
U.S.?
a. both the one in Ohio and the one in Italy
b. only the one in Ohio
c. only the one in Italy
d. neither the one in Ohio nor the one in Italy
Figure 4-6
RefertoFigure4-6.Suppose that the federal government is concerned about obesity in
the United States. Congress is considering two plans. One would require “junk food”
producers to include warning labels on all junk food. The other would impose a tax on
all products considered to be junk food. If the warning labels are successful, we could
illustrate the plan as producing a movement from
a. Point A to Point B in Panel 1.
b. Point B to Point A in Panel 1.
c. Point A to Point C in Panel 2.
d. Point C to Point A in Panel 2.
Within the U.S. population, teenagers (ages 16-19) have similar rates of labor-force
participation than adults of prime working age (ages 25-54), regardless of race or
gender.
a. True
b. False
In which case below does a person’s purchasing power from saving increase the most?
a. the nominal interest rate = 10% and inflation = 8%
b. the nominal interest rate = 9% and inflation = 6%
c. the nominal interest rate = 8% and inflation = 4%
d. the nominal interest rate = 7% and inflation = 2%