Figure 4-23
RefertoFigure4-23.In this market for watermelons, a severe drought occurs which
affects the watermelon crop. The equilibrium price
a. increases and the equilibrium quantity decreases.
b. decreases and the equilibrium quantity is ambiguous.
c. and quantity both increase.
d. and quantity both decrease.
Equilibrium price must increase when demand
a. increases and supply does not change, when demand does not change and supply
decreases, and when demand decreases and supply increases simultaneously.
b. increases and supply does not change, when demand does not change and supply
decreases, and when demand increases and supply decreases simultaneously.
c. decreases and supply does not change, when demand does not change and supply
increases, and when demand decreases and supply increases simultaneously.
d. decreases and supply does not change, when demand does not change and supply
increases, and when demand increases and supply decreases simultaneously.
The principal reason that monetary policy has lags is that it takes a long time for
a. changes in the interest rate to change aggregate demand.
b. changes in the money supply to change interest rates.
c. the Fed to make changes in policy.
d. Congress and the President to approve Fed policy.
Causes of the decline in the U.S. men’s laborforce participation rate over the past
several decades include young men now staying in school longer than their fathers and
grandfathers did, older men now retiring earlier and living longer, and more fathers now
staying at home to raise their children.
a. True
b. False
Real GDP per person is $10,000 in Country A, $20,000 in Country B, and $30,000 in
Country C. The saving rate increases by the same rate in all three countries. Other
things equal, we would expect that
a. all three countries will grow at the same rate.
b. Country A will grow the fastest.
c. Country B will grow the fastest.
d. Country C will grow the fastest.
Economist Michael Kremer found that world growth rates fell as population increased.
a. True
b. False
If macaroni and cheese is an inferior good, then an increase in
a. the price will cause the demand curve for macaroni and cheese to shift to the left.
b. the price will cause the demand curve for macaroni and cheese to shift to the right.
c. a consumer’s income will cause the demand curve for macaroni and cheese to shift to
the left.
d. a consumer’s income will cause the demand curve for macaroni and cheese to shift to
the right.
Who would be included in the labor force?
a. Maggie, who plans to work at the newspaper next year when she turns 16 years old.
b. Lisa, who is unhappy with her current job.
c. Bart, who is a full-time student and uninterested in finding employment.
d. None of the above is correct.
If business opportunities in a country become relatively less attractive relative to those
of other countries, then
a. both its net exports and net capital outflows fall.
b. both its net exports and net capital outflows rise.
c. its net exports fall and its net capital outflows fall.
d. its net exports rise and its net capital outflows fall
An increase in the price of a product and an increase in the number of sellers in the
market affect the supply curve in the same general way.
a. True
b. False
If P= 4 and Y= 200, then which of the following pairs of values are possible?
a. M= 800, V = 16
b. M= 150, V = 3
c. M= 400, V = 2
d. M= 200, V = 2
The real exchange rate is the nominal exchange rate, defined as foreign currency per
dollar, times
a. U.S. prices minus foreign prices.
b. U.S. prices divided by foreign prices.
c. foreign prices divided by U.S. prices.
d. None of the above is correct.
Which of the following might explain why the United States has so much currency per
person?
a. U.S. citizens are holding a lot of foreign currency.
b. Currency may be a preferable store of wealth for criminals.
c. People use credit and debit cards more frequently.
d. All of the above help explain the abundance of currency.
Capital flight increases a country’s interest rate. This increase in the interest rate makes
net capital outflow lower than it would be had the interest rate stayed the same.
a. True
b. False
If policymakers decrease aggregate demand, then in the long run
a. prices will be lower and unemployment will be higher.
b. prices will be lower and unemployment will be unchanged.
c. prices and unemployment will be unchanged.
d. None of the above is correct.
What term refers to the property that society has limited resources and therefore cannot
produce all the goods and services people wish to have?
a. inefficiency
b. inequality
c. scarcity
d. market failure
If Wrex can produce more math problems per hour and more book reports per hour than
Maxine can, then Wrex cannot gain from trading math problems and book reports with
Maxine.
a. True
b. False
If the natural rate of unemployment falls,
a. both the short-run and long-run Phillips curves shift left.
b. the short-run Phillips curve shifts left, the long-run Phillips curve is unchanged.
c. the short-run Phillips curve is unchanged, the long-run Phillips curve shifts right.
d. the short-run and the long-run Phillips curves shift right.
If a production function has constant returns to scale, then if all inputs double so does
production.
a. True
b. False
Some people argue that there are two advantages to holding mutual funds. The first is
that mutual funds provide an inexpensive way to hold a diversified portfolio. The
second is that because of their expertise mutual fund managers should be able to
consistently beat the market. Which of the following does the evidence show?
a. Diversification does reduce risk and mutual funds typically outperform the market.
b. Diversification does reduce risk, but mutual funds do not typically outperform the
market.
c. Diversification does not reduce risk but mutual funds typically outperform the
market.
d. Diversification does not reduce risk and mutual funds do not typically outperform the
market.
Which of the following by itself is consistent with the directions that the price level and
real GDP changed at the onset of the Great Depression?
a. aggregate demand shifted right
b. aggregate demand shifted left
c. aggregate supply shifted right
d. aggregate supply shifted left
The amount of unemployment that an economy normally experiences is called the
a. average rate of unemployment.
b. natural rate of unemployment.
c. cyclical rate of unemployment.
d. typical rate of unemployment.
Alexis and Tara both mine salt. Alexis mines 300 pounds in 20 hours. Tara mines 400
pounds in 40 hours. Which of the following is correct?
a. Alexis’s productivity is greater than Tara’s. This difference could be explained by
Alexis having more physical capital than Tara.
b. Alexis’s productivity is greater than Tara’s. This difference cannot be explained by a
difference in the physical capital each has.
c. Tara’s productivity is greater than Alexis’s. This difference could be explained by Tara
having more physical capital than Alexis.
d. Tara’s productivity is greater than Alexis’s. This difference cannot be explained by a
difference in the physical capital each has.
Figure 32-2
RefertoFigure32-2.At what real exchange rate is the quantity of dollars demanded
equal to 500?
a. 1
b. .8
c. .6
d. None of the above are correct.
Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer’s basket
consists of 4 pounds of pork and 3 bushels of corn.
RefertoTable24-3. If 2013 is the base year, then the CPI for 2013 was
a. 75.3.
b. 100.0.
c. 116.0.
d. 132.8.
What is the most important factor that explains differences in living standards across
countries?
a. the quantity of money
b. the level of unemployment
c. productivity
d. equality
An increase in the budget deficit shifts the demand for loanable funds to the right.
a. True
b. False
Figure26-5.Figure 26-5 shows the loanable funds market for a closed economy.
RefertoFigure26-5.Starting at point A, a change in tax laws that encouraged
households to save more would likely cause
a. the quantity of loanable funds traded to increase to $125 and the interest rate fall to
5% (point D).
b. the quantity of loanable funds traded to increase to $125 and the interest rate to rise
to 7% (point C).
c. the quantity of loanable funds traded to decrease to $75 and the interest rate to fall to
5% (point B).
d. the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to
7% (point E).
Which of the following alone can explain the change in the price level and output
during World War II?
a. aggregate demand shifted right
b. aggregate demand shifted left
c. aggregate supply shifted right
d. aggregate supply shifted left
For an open economy, the equation Y= C+ I+ G+ NXis an identity. If we define national
saving, S, as the total income in the economy that is left after paying for consumption
and government purchases, then for an open economy, it is true that
a. S= I.
b. S= 0.
c. I= S+ NX.
d. S= I+ NX.
In an open economy national saving equals domestic investment plus net capital
outflow.
a. True
b. False