One prominent debate over macroeconomic policy centers on the question of whether
monetary and fiscal policy should be used to try to stabilize the economy.
a. True
b. False
Which of the following is an example of a produced factor of production?
a. corn that is harvested from a field in Iowa
b. workers who are hired at a coal mine in West Virginia
c. skills that teachers in Texas acquire through continuing-education classes
d. All of the above are correct.
Which of the following events would shift money demand to the left?
a. an increase in the price level
b. a decrease in the price level
c. an increase in the interest rate
d. a decrease in the interest rate
Risk aversion helps to explain various things we observe in the economy, including
a. adherence to the old adage, “Don”t put all your eggs in one basket.”
b. insurance.
c. the risk-return trade-off.
d. All of the above are correct.
During a certain year, the nominal interest rate was 7 percent, the real interest rate was
4 percent, and the CPI was 198.3 at the end of the year. The CPI at the beginning of the
year was
a. 204.2
b. 192.5
c. 178.6
d. 220.1
When describing the opportunity cost of two producers, economists use the term
a. natural advantage.
b. trading advantage.
c. comparative advantage.
d. absolute advantage.
Banks advertise
a. the real interest rate, which is how fast the dollar value of savings grows.
b. the real interest rate, which is how fast the purchasing power of savings grows.
c. the nominal interest rate, which is how fast the dollar value of savings grows.
d. the nominal interest rate, which is how fast the purchasing power of savings grows.
If M= 3,000, P= 2, and Y= 6,000, what is velocity?
a. 1/4
b. 2
c. 4
d. 1
Which of the following results if the U.S. imposes an import quota on computer
components?
a. U.S. exports and U.S. imports both increase
b. U.S. exports increase but U.S. imports are unchanged
c. U.S. imports increase but U.S. exports are unchanged
d. None of the above is correct.
RefertoFigure4-27. Which of the four panels illustrates a decrease in quantity
demanded?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
Elena loves orange juice. She reads in the newspaper that 20 percent of the Florida
orange crop was destroyed by a late spring frost. Economists predict that the price of
oranges will rise by 50 percent by the end of the year. As a result, Elena’s demand for
orange juice
a. will increase but not until the end of the year.
b. increases today.
c. decreases as she looks for a substitute good.
d. shifts left today.
Table 4-12
A country club usually only allows members to purchase tickets for its celebrity golf
tournament, but the club is considering allowing non-members to purchase tickets this
year. The demand and supply schedules are as follows:
RefertoTable4-12.If only members are allowed to purchase tickets to this year’s
celebrity golf tournament, then what will be the equilibrium price?
a. $10
b. $15
c. $20
d. $25
If M= 6,000, P= 3, and Y= 3,000, what is velocity?
a. 6
b. 1.5
c. 0.67
d. 0.167
You observe people going to the bank more frequently. Other things the same this could
result from
a. an increase in inflation which increases money demand.
b. an increase in inflation which reduces money demand.
c. a decrease in inflation which increases money demand.
d. a decrease in inflation which reduces money demand.
The long-run aggregate supply curve shifts right if
a. immigration from abroad increases.
b. the capital stock increases.
c. technology advances.
d. All of the above are correct.
Market economies rely on which of the following to allocate scarce resources?
a. government
b. consumers
c. relative prices
d. real interest rates
A likely effect of government policies that redistribute income and wealth from the
wealthy to the poor is that those policies
a. enhance equality.
b. enhance efficiency.
c. increase the reward for working hard.
d. All of the above are correct.
Inflation necessarily distorts saving when either real interest income or nominal interest
income is taxed.
a. True
b. False
A production possibilities frontier is bowed outward when
a. the more resources the economy uses to produce one good, the fewer resources it has
available to produce the other good.
b. an economy is self-sufficient instead of interdependent and engaged in trade.
c. the rate of tradeoff between the two goods being produced is constant.
d. the rate of tradeoff between the two goods being produced depends on how much of
each good is being produced.
Table25-1.
Athens and Troy both produce only ribs and baked potatoes.
RefertoTable25-1. Which of the following is correct?
a. Both real GDP and real GDP per person are higher in Athens than Troy.
b. Real GDP is higher in Athens while real GDP per person is higher in Troy
c. Real GDP is higher in Troy while real GDP per person is higher in Athens.
d. Both real GDP and real GDP per person are higher in Troy than Athens.
When the Fed buys government bonds, the reserves of the banking system
a. increase, so the money supply increases.
b. increase, so the money supply decreases.
c. decrease, so the money supply increases.
d. decrease, so the money supply decreases.
If the U.S. real exchange rate appreciates, U.S. exports to Europe
a. and European exports to the U.S. both rise.
b. and European exports to the U.S. both fall.
c. rise, and European exports to the U.S. fall.
d. fall, and European exports to the U.S. rise.
In the circular-flow diagram, households and firms are the decision makers.
a. True
b. False
John Maynard Keynes described economics as an easy subject at which very few excel.
Which of the following is notone of the reasons Keynes gave for why so few people
excel at the study of economics?
a. An economist must also be a mathematician, historian, statesman, and philosopher in
some degree.
b. An economist must understand symbols and speak in words.
c. An economist must be purposeful and disinterested in a simultaneous mood.
d. An economist must understand environmental science, regulation, and political
science.
The short-run effects on the interest rate are
a. shown equally well using either liquidity preference theory or classical theory.
b. best shown using classical theory.
c. best shown using liquidity preference theory.
d. not shown well by either liquidity preference theory or classical theory.
Over the past five decades, the U.S. economy has become
a. more closed.
b. more open.
c. less trade-oriented.
d. more self-sufficient.
If US workers can produce everything in less time than Mexican workers, it is not
possible for the US to gain from trade with Mexico.
a. True
b. False
If scientists discover that steamed milk, which is used to make latts, prevents heart
attacks, what would happen to the equilibrium price and quantity of latts?
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.
Figure 4-4
RefertoFigure4-4.Which of the following statements is correct?
a. If the price is $6, the market quantity demanded is 15 units.
b. If the price is $9, the market quantity demanded is 24 units.
c. If the price is $12, the market quantity demanded is 9 units.
d. If the price is $15, the market quantity demanded is 39 units.
Which of the following statements about economic models is correct?
a. Economic models are built to mirror reality exactly.
b. Economic models are useful, but they should not be used for the purpose of
improving public policies.
c. Because economic models omit many details, they allow us to see what is truly
important.
d. Economic models seldom incorporate equations or diagrams.
The process of the investment accelerator involves
a. positive feedback from aggregate demand to investment.
b. negative feedback from aggregate demand to investment.
c. positive feedback from aggregate supply to investment.
d. negative feedback from aggregate supply to investment.
Describe how the use of leverage affects the impact of bank investments.
Figure 2-15
Refer to Figure2-15. Consider the production possibilities frontier for an economy that
produces only sofas and cars. As the economy moves from point A to point D, is the
opportunity cost of cars increasing, constant, or decreasing?
If the exchange rate falls, domestic goods become relativelyexpensive. This change in
the affordability of domestic goods makes domestic goodsattractive to domestic
residents. So, _______ ______.
In 2011 a country had a real GDP of $13.89 trillion and GDP deflator of 110. In 2012 it
had a nominal GDP of $17.8 trillion and real GDP of 14.24 trillion. What is the rate of
inflation in 2012?
Which two of the TePrincipleofEconomicimply that the Fed can profoundly affect the
economy?
What is the source of the demand for loanable funds in the open-economy
macroeconomic model ?
The potential positive feedback that government spending may have on investment is
known as the _____. The potential negative effect that government spending may have
on investment is known as the _____ effect.
Which curve in the market for foreign-currency exchange shifts and which direction
does it shift if the government budget deficit increases? Explain why an increase in the
budget deficit shifts this curve.
Why do we refer to physical capital as a produced factor of production?
Congress and the President implement an investment tax credit. Which curve in the
market for loanable funds shifts, which direction does it shift, and what happens to the
interest rate?
According to the classical dichotomy and money neutrality, a doubling of the money
supply, holding all else constant, causes prices toand real GDP to.
Nominal GDP is $12 trillion and real GDP is $15 trillion. What is the GDP deflator?
Show your work.
If the interest rate is 8 percent, then what is the present value of $5,000 to be received in
ten years?
If a friend tells you that he is certain a stock price will rise based on information he
heard on television or saw on the Internet, should you be skeptical? Explain.
What happens to net capital outflow as the real interest rate falls? Explain your answer.
It takes Heather 1 hour to change the oil in the car and 20 minutes to do the dishes. It
takes Zach 1.5 hours to change the oil in the car. For Zach to have a comparative
advantage changing the oil it must take him more than minutes to do the dishes.