At the original exchange rate an import quota
a. creates a surplus in the market for foreign-currency exchange, so the exchange rate
rises.
b. creates a surplus in the market for foreign-currency exchange, so the exchange rate
falls.
c. creates a shortage in the market for foreign-currency exchange, so the exchange rate
rises.
d. creates a shortage in the market for foreign-currency exchange, so the exchange rate
falls.
Which entity within the U.S. government is responsible for computing and reporting the
CPI?
a. the Department of Commerce
b. the Department of Labor
c. the General Accounting Office
d. the Council of Economic Advisers
Table 29-1.
The information in the table pertains to an imaginary economy.
RefetoTable29-1.What is the value of M2 in billions of dollars?
a. $9,815 billion
b. $8,315 billion
c. $7,565 billion
d. $7,405 billion
If the Fed increases the money supply, then 1/P
a. falls, so the value of money falls.
b. falls, so the value of money rises.
c. rises, so the value of money falls.
d. rises, so the value of money rises.
Which of the following is correct?
a. There is no debate about the effects of higher population growth on economic
growth.
b. Natural resources clearly place limits on growth; there is simply no way to reduce
either the amount or type of natural resources needed to produce goods.
c. How much an increase in capital increases a country’s output is independent of that
country’s current level
of capital.
d. Economists argue that outward rather than inward policies are likely to promote
economic growth.
Which of the following is the correct formula for the GDP deflator?
Because economists understand what things change GDP, they can predict recessions
with a fair amount of accuracy.
a. True
b. False
In an economy consisting of two people producing two goods, it is possible for one
person to have the absolute advantage and the comparative advantage in both goods.
a. True
b. False
Table 28-2
Labor Data for Aridia
RefetoTable28-2.The labor-force participation rate of Aridia in 2012 was
a. 50%.
b. 53.3%.
c. 56.25%.
d. 88.9%.
In recent years, the Fed has chosen to target interest rates rather than the money supply
because
a. Congress passed a law requiring them to do so.
b. the President requested them to do so.
c. the money supply is hard to measure with sufficient precision.
d. changes in the interest rate change aggregate demand, but changes in the money
supply do not.
Figure 28-4
RefetoFigure28-4.If the government imposes a minimum wage of $5, how many
workers will be unemployed?
a. 0
b. 2,000
c. 4,000
d. 6,000
Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
RefetoTable29-9. Metropolis National Bank is holding 2% of its deposits as excess
reserves. Assume that no banks in the economy want to maintain holdings of excess
reserves and that people only hold deposits and no currency. The Fed makes open
market purchases of $10,000. The person who sold bonds to the Fed deposits all the
funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by
how much will the money supply increase?
a. $190,000
b. $200,000
c. $240,000
d. None of the above are correct.
Assuming a multiplier effect, but no crowding-out or investment-accelerator effects, a
$100 billion increase in government expenditures shifts aggregate
a. demand rightward by more than $100 billion.
b. demand rightward by less than $100 billion.
c. supply leftward by more than $100 billion.
d. supply leftward by less than $100 billion.
A decrease in the price of a good will
a. increase supply.
b. decrease supply.
c. increase quantity supplied.
d. decrease quantity supplied.
The law of supply and demand asserts that
a. demand curves and supply curves tend to shift to the right as time goes by.
b. the price of a good will eventually rise in response to an excess demand for that
good.
c. when the supply curve for a good shifts, the demand curve for that good shifts in
response.
d. the equilibrium price of a good will be rising more often than it will be falling.
If aggregate demand shifts right, then eventually price level expectations rise. This
increase in price level expectations causes the aggregate demand curve to shift to the
left back to its original position.
a. True
b. False
Sellers respond to a surplus by cutting their prices.
a. True
b. False
In 1980, the U.S. economy had an inflation rate of
a. about 1 percent and an unemployment rate of about 7 percent.
b. less than 4 percent and an unemployment rate of less than 6 percent.
c. less than 7 percent and an unemployment rate of about 9 percent.
d. more than 9 percent and an unemployment rate of about 7 percent.
Some long-run unemployment may be explained by the fact that the number of jobs
available in some labor markets may be insufficient to give a job to everyone who
wants one.
a. True
b. False
Other things the same, during recessions taxes tend to
a. rise. The rise in taxes stimulates aggregate demand.
b. rise. The rise in taxes contracts aggregate demand.
c. fall. The fall in taxes stimulates aggregate demand.
d. fall. The fall in taxes contracts aggregate demand.
Scenario25-1. An economy’s production form takes the form Y= AF(L, K, H, N).
RefertoScenario25-1. If the production function has the constant-returns-to-scale
property, then it can be rewritten as
a. Y/L=AF1,K/L,H/L,N/L)
b. Y/L=AF(L,1,H/L,N/L)
c. Y/L=AF(L,K/L,1,N/L)
d. Y/L=AF(L,K/L,H/L,1
The historical rise in living standards of American workers is primarily a result of
a. the influence of labor unions in America.
b. tariff protection imposed by the American government.
c. the enactment of minimum-wage laws in America.
d. the rise in American productivity.
The Central Bank of Wiknam increases the money supply at the same time the
Parliament of Wiknam passes a new investment tax credit. Which of these policies shift
aggregate demand to the right?
a. both the money supply increase and the investment tax credit
b. the money supply increase but not the investment tax credit
c. the investment tax credit but not the money supply increase
d. neither the investment tax credit nor the money supply increase
Sally purchased a log-splitter five years ago. This year, she purchases some new parts,
gasoline, oil, and spends 2 hours repairing the log-splitter. Which of the following is
included in this year’s GDP?
a. the amount she paid to buy the new parts
b. the amount she paid to buy new parts and gasoline
c. the amount she paid to buy new parts, gasoline, and oil.
d. the amount she paid to buy new parts, gasoline, oil, and the market value of the 2
hours spent to repair the log-splitter.
The aggregate-demand curve
a. has a slope that is explained in the same way as the slope of the demand curve for a
particular product.
b. is vertical in the long run.
c. shows an inverse relation between the price level and the quantity of all goods and
services demanded.
d. All of the above are correct.
Suppose that Thom experiences a greater loss in utility if he loses $50 than he would
gain in utility if he wins $50.
This implies that Thom’s
a. marginal utility diminishes as wealth rises, so he must be risk averse.
b. marginal utility diminishes as wealth rises, but we can”t tell from this if he is risk
averse.
c. marginal utility increases as wealth rises, so he must be risk averse.
d. marginal utility increases as wealth rises, but we can”t tell from this if he is risk
averse.
The variable that links the market for loanable funds and the market for
foreign-currency exchange is
a. net capital outflow.
b. national saving.
c. exports.
d. domestic investment.
Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist
would refer to these purchases as investment.
a. True
b. False
Friedman argued that the Fed could use monetary policy to peg
a. the level of real GDP.
b. the growth rate of real GDP.
c. the rate of unemployment.
d. None of the above is correct.
The consumption component of GDP includes spending on
a. durable goods and nondurable goods, but not spending on services.
b. durable goods and services, but not spending on nondurable goods.
c. nondurable goods and services, but not spending on durable goods.
d. durable goods, nondurable goods, and services.