Assume that U.S. agricultural land is used either to raise cotton for clothing or to grow
wheat. Curve FG in Figure 2-8 represents the current production possibilities frontier
for cotton and wheat. What could cause the production possibilities frontier to shift
from FG to FH?
Figure 2-8
a. a change in government subsidies
that favors wheat production over cotton production
b. development of a new fertilizer that improves production of wheat, but has no impact
on cotton production
c. development of a new fertilizer that improves production of cotton, but has no impact
on wheat production
d. newly reclaimed swampland that is equally suited to growing either crop
e. newly reclaimed swampland that can be used to grow either crop, but is better suited
to growing wheat
Refer to Figure 14-4. If the interest rate is currently 8 percent, we would expect the
a. interest rate to rise to 10 percent
b. interest rate to rise to 12 percent
c. interest rate to fall to 6 percent
d. quantity of money held to decrease to $500 billion
e. money supply to increase to $700 billion
Economists maintain that the wage rate that workers should really care about is
a. both the real wage rate and the nominal wage rate
b. the nominal wage rate
c. the nominal wage rate multiplied by the real wage rate
d. neither the real wage rate nor the nominal wage rate
e. the real wage rate
Which of the following is a possible impetus for a banking panic?
a. An individual bank fails.
b. A large, very important bank fails.
c. Congress increases the amount of demand deposits that are protected by insurance.
d. Banking rules change to make it harder for banks to make bad loans.
e. Changes in the discount rate.
Which of the following is not true about the housing market?
a. The price of housing will increase or decrease in order to achieve an equilibrium
b. An increase in the demand for housing will cause an increase in the quantity supplied
of housing
c. When the demand for housing increases, the price of housing will increase but the
quantity supplied will not increase in the short run
d. The housing market is a unique market because most people had to borrow money to
buy their homes
e. The only way to increase the supply of housing is to build more houses
The knowledge that students gain while in college is referred to by economists as
human capital.
Real GDP is calculated because
a. it is a much better measure of economic behavior than nominal GDP
b. the value of the dollar is increasing
c. it allows us to make comparisons between countries
d. nominal GDP has no theoretical foundation
e. nominal GDP is corrected for inflation
The committee of the National Bureau of Economic Research that determines when a
recession in the U.S begins and ends looks at
a. employment, industrial production, sales, and personal income.
b. real GDP.
c. employment and sales.
d. employment.
e. sales and industrial production.
The federal funds rate is
a. determined in a market but targeted by the Fed.
b. chosen by the Fed and enforced on the banks.
c. chosen by Congress and enforced on the Fed.
d. chosen by Congress and enforced on the banks.
e. determined in the market and beyond the control of the Fed.
Equilibrium GDP
a. is not affected by nominal wage adjustments
b. represents the level of output at which public welfare is maximized
c. in the long run is equal to the average of the short-run GDP equilibria
d. is influenced by long-run adjustments in the labor market
e. falls if aggregate demand increases
Under a managed float, a country’s central bank
a. buys or sells its currency in order to keep its money supply stable
b. buys or sells its currency in order to maintain a stable exchange rate
c. may sell its currency in order to prevent a depreciation
d. may buy a foreign currency in order to prevent its appreciation
e. prints money and uses it to buy foreign currency
The equation GDP = C + I + G + NX best describes the
a. the output approach to measuring GDP
b. the factor payments approach to measuring GDP
c. the value added approach to measuring GDP
d. the expenditures approach to measuring GDP
e. the exchanges approach to measuring GDP
The amount of a good or service that buyers would be willing and able to purchase at a
specific price is known as
a. quantity demanded
b. demand
c. supply
d. quantity supplied
e. opportunity cost
Macroeconomics studies the behavior of individual decision makers while
microeconomics studies the overall economy.
If an excise tax is imposed on shirts,
a. the number of shirts produced will exceed the number demanded
b. the number of shirts demanded will exceed the number supplied
c. the equilibrium market price will decrease
d. the amount consumers pay for each shirt will decrease
e. the net revenue producers receive from each shirt will decrease
An understanding of macroeconomics is valuable because it can help
a. in making purchase decisions
b. us to understand the forces that determine how fast the economy grows
c. us to understand why some firms earn more economic profit than others
d. to minimize the amount of tax an individual owes
e. minimize the opportunity cost of making poor decisions
Refer to Figure 9-15. What causes the supply to change from S1 to S2 at the same time
demand changes from D1 to D2?
a. The investment tax credit increases.
b. The capital gains tax decreases while the corporate profits tax decreases.
c. The capital gains tax increases while the investment tax credit increases.
d. The capital gains tax decreases while the investment tax credit stays constant.
e. The capital gains tax decreases while the corporate profits tax increases.