According to purchasing-power parity, when a country’s central bank decreases the
money supply, a unit of money
a. gains value both in terms of the domestic goods and services it can buy and in terms
of the foreign currency it can buy.
b. gains value in terms of the domestic goods and services it can buy, but loses value in
terms of the foreign currency it can buy.
c. loses value in terms of the domestic goods and services it can buy, but gains value in
terms of the foreign currency it can buy.
d. loses value both in terms of the domestic goods and services it can buy and in terms
of the foreign currency it can buy.
Which of the following is an example of a renewable natural resource?
a. the knowledge possessed by scientists
b. carpenters’ labor services
c. lumber
d. All of the above are correct.
The aggregate-demand curve shows the
a. quantity of labor and other inputs that firms want to buy at each price level.
b. quantity of labor and other inputs that firms want to buy at each inflation rate.
c. quantity of domestically produced goods and services that households want to buy at
each price level.
d. quantity of domestically produced goods and services that households, firms, the
government, and customers abroad want to buy at each price level.
Which of the following has the highest future value?
a. $100 saved for 2 years at 10 percent interest
b. $110 saved for 2 years at 9 percent interest
c. $120 saved for 2 years at 8 percent interest
d. $130 saved for 2 years at 7 percent interest
Table 3-22
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
RefertoTable3-22.Portugal has an absolute advantage in the production of
a. toothbrushes and a comparative advantage in the production of toothbrushes.
b. toothbrushes and a comparative advantage in the production of hairbrushes.
c. hairbrushes and a comparative advantage in the production of toothbrushes.
d. hairbrushes and a comparative advantage in the production of hairbrushes.
If a central bank increases the money supply growth rate, then in the short run
a. unemployment rises. In the long run the short-run Phillips curve shifts right.
b. unemployment rises. In the long run the short-run Phillips curve shifts left.
c. unemployment falls. In the long run the short-run Phillips curve shifts right.
d. unemployment falls. In the long run the short-run Phillips curve shifts left.
A limit on the quantity of a good produced abroad that can be purchased domestically is
called a(n)
a. tariff.
b. excise tax.
c. import quota.
d. None of the above is correct.
Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and
Sally have a double- coincidence of wants.
a. True
b. False
RefertoFigure4-27.Which of the four panels represents the market for winter coats as
we progress from winter to spring?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
The president of each regional Federal Reserve Bank is appointed by
a. the U.S. president with the approval of the Senate.
b. the Board of Governors.
c. the voting members of the Federal Open Market Committee.
d. the board of directors of that regional Federal Reserve Bank.
Which of the following is included in the supply of U.S. dollars in the market for
foreign-currency exchange in the open-economy macroeconomic model?
a. a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle
b. a U.S. tire maker wants to build a new factory in China
c. a U.S. company wants to import goods to sell in its retail stores
d. All of the above are correct.
A movement along a supply curve is called a change in supply while a shift of the
supply curve is called a change in quantity supplied.
a. True
b. False
A nation’s standard of living is best measured by its
a. real GDP.
b. real GDP per person.
c. nominal GDP.
d. nominal GDP per person.
If consumers view cappuccinos and latts as substitutes, what would happen to the
equilibrium price and quantity of latts if the price of cappuccinos rises?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
The length of time until a bond matures is called the
a. perpetuity.
b. term.
c. maturity.
d. intermediation.
In a simple circular-flow diagram, firms use the money they get from a sale to
a. pay wages to workers.
b. pay rent to landlords.
c. pay profit to the firms’ owners.
d. All of the above are correct.
The monetary-policy framework called inflation targeting is used explicitly by
a. no major country.
b. most major countries except the United States and Japan.
c. the United States, but it is not used by other major countries.
d. most major countries, including the United States and Japan.
Figure 3-15
RefertoFigure3-15.Perry should specialize in the production of
a. novels.
b. poems.
c. both goods.
d. neither good.
The primary advantage of mutual funds is that they
a. always make a return that “beats the market.”
b. allow people with small amounts of money to diversify.
c. provide customers with a medium of exchange.
d. All of the above are correct.
If expected inflation is constant, then when the nominal interest rate falls, the real
interest rate
a. falls by more than the change in the nominal interest rate.
b. falls by the change in the nominal interest rate.
c. rises by the change in the nominal interest rate.
d. rises by more than the change in the nominal interest rate.
Figure 3-21
Refer to Figure3-21. Suppose Uzbekistan decides to increase its production of bolts by
10. What is the opportunity cost of this decision?
a. 1/2 nail
b. 2 nails
c. 5 nails
d. 20 nails
The terms equality and efficiencyare similar in that they both refer to benefits to society.
However they are different in that
a. equality refers to uniform distribution of those benefits and efficiency refers to
maximizing benefits from scarce resources.
b. equality refers to maximizing benefits from scarce resources and efficiency refers to
uniform distribution of those benefits.
c. equality refers to everyone facing identical tradeoffs and efficiency refers to the
opportunity cost of the benefits.
d. equality refers to the opportunity cost of the benefits and efficiency refers to
everyone facing identical tradeoffs.
Figure 4-7
RefertoFigure4-7. The shift from Db to Da is called
a. an increase in demand.
b. a decrease in demand.
c. a decrease in quantity demanded.
d. an increase in quantity demanded.
The law of demand states that, other things equal, when the price of a good
a. falls, the demand for the good rises.
b. rises, the quantity demanded of the good rises.
c. rises, the demand for the good falls.
d. falls, the quantity demanded of the good rises.
According to the political business cycle theory, if the Fed wanted to see a President
re-elected, prior to the election it might
a. buy bonds to raise interest rates.
b. buy bonds to reduce interest rates.
c. sell bonds to raise interest rates.
d. sell bonds to reduce interest rates.
The principle that trade can make everyone better off applies to
a. individuals.
b. families.
c. countries.
d. All of the above
Zero inflation
a. might be dangerous because it could lead to rapidly increasing prices.
b. would limit the flexibility of the labor market and so could at times raise
unemployment.
c. would make it easy for the Central bank to create negative real interest rates.
d. is impossible to achieve in the real world.
Scenario34-1.Take the following information as given for a small, imaginary economy:
When income is $10,000, consumption spending is $6,500.
When income is $11,000, consumption spending is $7,250.
RefertoScenario34-1.For this economy, an initial increase of $200 in net exports
translates into a(n)
a. $570 increase in aggregate demand when the crowding-out effect is taken into
account.
b. $800 increase in aggregate demand when the crowding-out effect is taken into
account.
c. $1,400 increase in aggregate demand in the absence of the crowding-out effect.
d. $800 increase in aggregate demand in the absence of the crowding-out effect.
Suppose the government ran a budget surplus in 2010 and a larger surplus in 2011. The
loanable funds model would predict that, as a result of the increase in the surplus,
a. both the government debt and interest rates increased between 2010 and 2011.
b. both the government debt and interest rates decreased between 2010 and 2011.
c. the government debt increased and interest rates decreased between 2010 and 2011.
d. the government debt decreased and interest rates increased between 2010 and 2011.
Suppose the banking system currently has $400 billion in reserves, the reserve
requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of
deposits?
a. $5,000 billion
b. $4,937.5 billion
c. $5,062.5 billion
d. $4,995 billion
Given a nominal interest rate of 8 percent, in which of the following cases would you
earn the highest after-tax real interest rate?
a. Inflation is 5 percent; the tax rate is 40 percent.
b. Inflation is 4 percent; the tax rate is 30 percent.
c. Inflation is 3 percent; the tax rate is 45 percent.
d. Inflation is 2 percent; the tax rate is 50 percent.
Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds
to buy new machinery for one of its breweries.
a. Fran and Miller are both investing.
b. Fran and Miller are both saving.
c. Fran is investing; Miller is saving.
d. Fran is saving; Miller is investing.
The increase in international trade in the United States is partly due to
a. improvements in transportation.
b. advances in telecommunications.
c. increased trade of goods with a high value per pound.
d. All of the above are correct.
If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic
investment
a. increases, and U.S. net capital outflow increases.
b. increases, and U.S. net capital outflow decreases.
c. decreases, and U.S. net capital outflow increases.
d. decreases, and U.S. net capital outflow decreases.