Svetlana is risk averse. Which of the following is correct about Svetlana?
a. Her marginal utility of wealth increases as her income increases.
b. She will always accept a bet if the probability of winning a dollar is the same as the
probability of losing a dollar.
c. Her utility function is a straight line.
d. None of the above are correct.
Measured in 2010 dollars, real GDP per person in the United States in 2010 was about
14 times that in
a. China.
b. India.
c. Indonesia.
d. Pakistan.
At the equilibrium real interest rate in the open-economy macroeconomic model
a. saving = domestic investment
b. saving = net capital outflow
c. net capital outflow = domestic investment
d. net capital outflow + domestic investment = saving
From 2008-2009 the Federal Reserve created a very large increase in the money supply.
According to the short-run Phillips curve this policy should have
a. raised inflation and unemployment.
b. raised inflation and reduced unemployment.
c. reduced inflation and raised unemployment.
d. reduced inflation and unemployment.
Investment from abroad
a. is a way for poor countries to learn the state-of-the-art technologies developed and
used in richer countries.
b. is viewed by economists as a way to increase growth.
c. often requires removing restrictions that governments have imposed on foreign
ownership of domestic capital.
d. All of the above are correct.
If at a given real interest rate desired national saving is $200 billion, domestic
investment is $100 billion, and net capital outflow is $80 billion, then at that real
interest rate in the loanable funds market there is a
a. surplus. The real interest rate will rise.
b. surplus. The real interest rate will fall.
c. shortage. The real interest rate will rise.
d. shortage. The real interest rate will fall.
Table 3-3
ProductionOpportunities
Refer to Table3-3. We could use the information in the table to draw a production
possibilities frontier for England and a second production possibilities frontier for
France. If we were to do this, measuring wine along the horizontal axis, then
a. the slope of England’s production possibilities frontier would be 4 and the slope of
France’s production possibilities frontier would be -0.4.
b. the slope of England’s production possibilities frontier would be 0.25 and the slope of
France’s production possibilities frontier would be -2.5.
c. the slope of England’s production possibilities frontier would be 0.25 and the slope of
France’s production possibilities frontier would be 2.5.
d. the slope of England’s production possibilities frontier would be 4 and the slope of
France’s production possibilities frontier would be 0.4.
Which of the following would, by itself, reveal the most about a country’s standard of
living?
a. its level of capital
b. the number of hours worked
c. its availability of natural resources
d. its productivity
In the early 1970s, the short-run Phillips curve shifted
a. rightward as inflation expectations rose.
b. rightward as inflation expectations fell.
c. leftward as inflation expectations rose.
d. leftward as inflation expectations fell.
When the value of money is on the vertical axis, the money supply curve is vertical and
shifts right if the Federal Reserve buys bonds.
a. True
b. False
If imports = 500 billion euros, exports = 700 billion euros, purchases of domestic assets
by foreign residents = 600 billion euros, and purchases of foreign assets by domestic
residents = 800 billion euros, what is the quantity of euros demanded in the market for
foreign-currency exchange?
a. 1,100 billion euros
b. 600 billion euros
c. 500 billion euros
d. 200 billion euros
Table 23-6
The table below contains data for the country of Batterland, which produces only
waffles and pancakes. The base year is 2013.
RefertoTable23-6.In 2012, this country’s GDP deflator was
a. 74.2.
b. 100.0.
c. 171.4.
d. 240.0.
The traditional view of the production process is that capital is subject to
a. constant returns.
b. increasing returns.
c. diminishing returns.
d. diminishing returns for low levels of capital, and increasing returns for high levels of
capital.
Most economists believe that in the short run
a. real and nominal variables are determined independently and that money cannot
move real GDP away from its long-run trend.
b. real and nominal variables are determined independently but that money can
temporarily move real GDP away from its long-run trend.
c. real and nominal variables are highly intertwined but that money cannot move real
GDP away from its long- run trend.
d. real and nominal variables are highly intertwined and that money can temporarily
move real GDP away from its long-run trend.
Suppose that the central bank must follow a rule that requires it to increase the money
supply when the price level falls and decrease the money supply when the price level
rises. If the economy starts from long-run equilibrium and aggregate demand shifts
right, the central bank must
a. increase the money supply so interest rates rise.
b. increase the money supply so interest rates fall.
c. decrease the money supply so interest rates rise.
d. decrease the moneys supply so interest rates fall
An increase in the price of a good will
a. increase supply.
b. decrease supply.
c. increase quantity supplied.
d. decrease quantity supplied.
In one day Madison Laundry washed 4,000 pounds of laundry with 5 workers who each
worked 8 hours. What was its productivity?
a. 4000 pounds of laundry
b. 500 pounds of laundry per hour
c. 100 pounds of laundry per hour
d. None of the above is correct.
For the general population, a 10 percent increase in the price of cigarettes leads to a
a. 1 percent reduction in the quantity demanded of cigarettes.
b. 4 percent reduction in the quantity demanded of cigarettes.
c. 10 percent reduction in the quantity demanded of cigarettes.
d. 12 percent reduction in the quantity demanded of cigarettes.
Financial intermediaries typically require mortgage borrowers to have homeowner’s
insurance and do credit checks before making the loan.
a. The insurance requirement and the credit check are both designed primarily to reduce
adverse selection.
b. The insurance requirement and the credit check are both designed primarily to reduce
the risk of moral hazard.
c. The insurance requirement is designed primarily to reduce adverse selection; the
credit check is designed primarily to reduce the risk of moral hazard.
d. The insurance requirement is designed primarily to reduce the risk of moral hazard;
the credit check is designed primarily to reduce adverse selection.
For purposes of calculating the CPI, the apparel category of consumer spending
includes the cost of
a. clothing, but not footwear or jewelry.
b. clothing and footwear, but not jewelry.
c. clothing and jewelry, but not footwear.
d. clothing, footwear, and jewelry.
What is the future value of $750 one year from today if the interest rate is 2.5 percent?
a. $766.50
b. $768.75
c. $770.23
d. None of the above are correct to the nearest cent.
If expected inflation is constant, then when the nominal interest rate increases, the real
interest rate
a. increases by more than the change in the nominal interest rate.
b. increases by the change in the nominal interest rate.
c. decreases by the change in the nominal interest rate.
d. decreases by more than the change in the nominal interest rate.
The property of society getting the most it can from its scarce resources is called
a. efficiency.
b. equality.
c. externality.
d. productivity.
If the demand for movies increases at the same time as the movie industry adopts
labor-saving technology for producing movies, the equilibrium price for movies will
increase, but the effect on the equilibrium quantity of movies is ambiguous.
a. True
b. False
If Yand Vare constant and Mdoubles, the quantity equation implies that the price level
a. more than doubles.
b. changes but less than doubles.
c. doubles.
d. does not change
Suppose there is an increase in government spending. To stabilize output, the Federal
Reserve would
a. increase government spending.
b. increase the money supply.
c. decrease government spending.
d. decrease the money supply.
An individual would suffer lower losses or maybe even gain from an unexpectedly
higher inflation rate if
a. she held much currency and on net was a lender.
b. she held much currency and on net was a borrower.
c. she held little currency and on net was a lender.
d. she held little currency and on net was a borrower.
The initial impact of an increase in an investment tax credit is to shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
Suppose the city of Des Moines has a high credit rating, and so when Des Moines
borrows funds by selling bonds,
a. the city’s high credit rating and the tax status of municipal bonds both contribute to a
lower interest rate than would otherwise apply.
b. the city’s high credit rating and the tax status of municipal bonds both contribute to a
higher interest rate than would otherwise apply.
c. the city’s high credit rating contributes to a lower interest rate than would otherwise
apply, while the tax status of municipal bonds contributes to a higher interest rate than
would otherwise apply.
d. the city’s high credit rating contributes to a higher interest rate than would otherwise
apply, while the tax status of municipal bonds contributes to a lower interest rate than
would otherwise apply.
Inflation
a. causes people to spend more time reducing money balances. When inflation is
unexpectedly high it redistributes wealth from lenders to borrowers.
b. causes people to spend more time reducing money balances. When inflation is
unexpectedly high it redistributes wealth from borrowers to lenders.
c. causes people to spend less time reducing money balances. When inflation is
unexpectedly high it redistributes wealth from lenders to borrowers.
d. causes people to spend less time reducing money balances. When inflation is
unexpectedly high it redistributes wealth from borrowers to lenders.