Table 10-4
The country of Caspir produces only cereal and milk. Quantities and prices of these
goods for the last several years are shown below. The base year is 2008.
Prices and Quantities
Refer to Table 10-4. In 2010, this country’s
a. real GDP was $780, and the GDP deflator was 141.0.
b. real GDP was $825, and the GDP deflator was 133.3.
c. real GDP was $780, and the GDP deflator was 133.3
d. real GDP was $825, and the GDP deflator was 141.0
An increase in real interest rates in the United States changes the quantity of loanable
funds demanded because
a. U.S. residents will want to buy more foreign assets.
b. Foreign residents will want to buy fewer foreign assets.
c. U.S. firms will want to purchase fewer U.S. capital goods.
d. All of the above are correct.
Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central
bank, the Bank of Highland, with the hopes of reducing the inflation rate.
Refer to Monetary Policy in Highland. The Bank of Highland publicizes that it
intends to reduce the inflation rate to 5%. If Highlanders lower their inflation
expectations, which curve shifts to the left?
a. both the short-run and the long-run Phillips curves
b. neither the short-run nor the long-run Phillips curves
c. only the short-run Phillips curve
d. only the long-run Phillips curve
Which of the following did not happen during the onset of the Great Depression?
a. The money supply fell as households took money out of bank deposits.
b. The Fed conducted expansionary monetary policy.
c. Stock prices fell about 90 percent.
d. Disruption of the banking system made it difficult for some firms to obtain funds for
investment.
If the demand for a good falls when income falls, then the good is called a(n)
a. normal good.
b. regular good.
c. luxury good.
d. inferior good.
Which of the following equations is correct?
a. S = I + C
b. S = I – NX
c. S = I + NCO
d. S = NX – NCO.
In the open-economy macroeconomic model, if the U.S. interest rate rises, then its
a. net capital outflow rises, so the supply of dollars in the market for foreign exchange
shifts right.
b. net capital outflow rises, so the demand for dollars in the market for foreign
exchange shifts right.
c. net capital outflow falls, so the supply of dollars in the market for foreign exchange
shifts left.
d. net capital outflow falls, so the demand for dollars in the market for foreign exchange
shifts left.
The inflation rate is the
a. absolute change in real GDP from one period to another.
b. percentage change in real GDP from one period to another.
c. absolute change in the price level from one period to another.
d. percentage change in the price level from one period to another.
Which of the following statements regarding the consumer price index and the GDP
deflator is correct?
a. The two price measures are always equal.
b. Divergence between the two price measures is the rule, not the exception.
c. Divergence between the two price measures is the exception, not the rule.
d. None of the above is correct.
Which of the following is correct if there is an adverse supply shock?
a. The short-run aggregate supply curve and the short-run Phillips curve both shift right.
b. The short-run aggregate supply curve and the short-run Phillips curve both shift left.
c. The short-run aggregate supply curve shifts right and the short-run Phillips curve
shifts left.
d. The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts
right.
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.
The last $2,000 of Rolanda’s wealth adds less to her utility than the previous $2,000.
Based on this information, Rolanda has
a. increasing marginal utility of wealth and is risk averse.
b. increasing marginal utility of wealth and is not risk averse.
c. decreasing marginal utility of wealth and is risk averse.
d. decreasing marginal utility of wealth and is not risk averse.
Suppose that Congress were to institute an investment tax credit. What would happen in
the market for loanable funds?
a. The demand for loanable funds would shift left.
b. The supply of loanable funds would shift left.
c. The demand for loanable funds would shift right.
d. The supply of loanable funds would shift right.
If a consumer places a value of $15 on a particular good and if the price of the good is
$17, then the
a. consumer has consumer surplus of $2 if he or she buys the good.
b. consumer does not purchase the good.
c. market is not a competitive market.
d. price of the good will fall due to market forces.
Table 15-1
Labor Data for Aridia
Refer to Table 15-1. The labor-force participation rate of Aridia in 2012 was
a. 50%.
b. 53.3%.
c. 56.25%.
d. 88.9%.
Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P
represents the price of crude oil.
Refer to Figure 9-14. When the country for which the figure is drawn allows
international trade in crude oil,
a. consumer surplus for domestic crude-oil consumers decreases.
b. the demand for crude oil by domestic crude-oil consumers decreases.
c. the losses of the domestic losers outweigh the gains of the domestic winners.
d. domestic crude-oil producers sell less crude oil.
The supply of a good will be more elastic, the
a. more the good is considered a luxury.
b. broader is the definition of the market for the good.
c. larger the number of close substitutes for the good.
d. longer the time period being considered.
A Japanese firm buys lumber from the United States and pays for it with yen. Other
things the same, Japanese
a. net exports increase, and U.S. net capital outflow increases.
b. net exports increase, and U.S. net capital outflow decreases.
c. net exports decrease, and U.S. net capital outflow increases.
d. net exports decrease, and U.S. net capital outflow decreases.
Figure 6-21
Refer to Figure 6-22. As the figure is drawn, who sends the tax payment to the
government?
a. The buyers send the tax payment.
b. The sellers send the tax payment.
c. A portion of the tax payment is sent by the buyers, and the remaining portion is sent
by the sellers.
d. The question of who sends the tax payment cannot be determined from the figure.
Suppose that the Federal reserve is concerned about the effects of rising stock prices on
the economy. What could it do?
a. buy bonds to raise the interest rate
b. buy bonds to lower the interest rate
c. sell bonds to raise the interest rate
d. sell bonds to raise the interest rate
In Belgium, Norway, and Sweden, the percentage of workers who belong to unions is
a. almost zero.
b. less than it is in the United States.
c. about the same as it is in the United States.
d. greater than it is in the United States.
You and your college roommate eat three packages of Ramen noodles each week. After
graduation last month, both of you were hired at several times your college income. You
still enjoy Ramen noodles very much and buy even more, but your roommate plans to
buy fewer Ramen noodles in favor of foods she prefers more. When looking at income
elasticity of demand for Ramen noodles, yours would
a. be negative, and your roommate’s would be positive.
b. be positive, and your roommate’s would be negative.
c. be zero, and your roommate’s would approach infinity.
d. approach infinity, and your roommate’s would be zero.
Figure 2-15
Relationship between Price and Cups of Coffee
Refer to Figure 2-15. In the ordered pair (4, 6)
a. the x-coordinate is 4 and the y-coordinate is 6.
b. the x-coordinate is 6 and the y-coordinate is 4.
c. the numbers tell the location of the origin.
d. the 4 represents the price and the 6 represents the number of cups of coffee.
Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price
index was 177 in 2001 and 266 in 2006. Dewey’s 2006 salary in 2001 dollars is
a. $47,768.36.
b. $63,214.29.
c. $84,550.00.
d. $142,768.36.
Figure 15-1
Refer to Figure 15-1. If the government imposes a minimum wage of $8, then how
many workers will be employed?
a. 3000
b. 4000
c. 5000
d. 7000
If an American-based firm opens and operates a new watch factory in Panama, then it is
engaging in
a. foreign portfolio investment.
b. foreign financial investment.
c. foreign direct investment.
d. indirect foreign investment.
Suppose a basket of goods and services has been selected to calculate the consumer
price index. In 2005, the basket of goods cost $108.00; in 2006, it cost $135.00; and in
2007, it cost $168.75. Which of the following statements is correct?
a. Using 2005 as the base year, the economy’s inflation rate was higher in 2007 than it
was in 2006.
b. If 2007 is the base year, then the CPI is 33.75 in 2006.
c. If the CPI is 156.25 in 2007, then 2005 is the base year.
d. Using 2005 as the base year, the economy’s inflation rate for 2006 was 27 percent.
With respect to how economists study the economy, which of the following statements
is most accurate?
a. Economists study the past, but they do not try to predict the future.
b. Economists use “rules of thumb” to predict the future.
c. Economists devise theories, collect data, and analyze the data to test the theories.
d. Economists use controlled experiments in much the same way that biologists and
physicists do.
Both Arnold and Will work 10 hours a day. Arnold can produce six baskets of goods per
hour while Will can produce four baskets of the same goods per hour. It follows that
Arnold’s
a. productivity is greater than Will’s.
b. output is greater than Will’s.
c. standard of living is higher than Will’s.
d. All of the above are correct.
The Economy in 2008
In the first half of June 2008 the effects of a housing and financial crisis and an increase
in world prices of oil and foodstuffs were affecting the economy.
Refer to The Economy in 2008. Given the effects of the financial and housing crisis on
the price level and output and the effects of increased world commodity prices on the
price level and output, the aggregate demand and aggregate supply model tells us that
a. output rises and the price level falls.
b. output may rise, fall or stay the same and the price level rises.
c. output falls and the price level may rise, fall or stay the same.
d. None of the above is correct.
Total output in an economy increases when each person specializes because
a. there is less competition for the same resources.
b. each person spends more time producing that product in which he or she has a
comparative advantage.
c. a wider variety of products will be produced within each country due to
specialization.
d. government necessarily plays a larger role in the economy due to specialization.
Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000
final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to
make 270,000 final goods.
a. Country A has higher productivity and higher real GDP per person than country B.
b. Country A has lower productivity and lower real GDP per person than country B.
c. Country A has higher productivity, but lower real GDP per person than country B.
d. Country B has lower productivity, but higher real GDP per person than country B.