Consider the market for new DVDs. If DVD players became cheaper, buyers expected
DVD prices to fall next year, used DVDs became more expensive, and DVD production
technology improved, then the equilibrium price of a new DVD would
a. rise.
b. fall.
c. stay the same.
d. could rise, fall, or remain unchanged.
Table 4-3
RefertoTable4-3. If these are the only four buyers in the market, then the market
quantity demanded at a price of $2 is
a. 0 units.
b. 3.5 units.
c. 12 units.
d. 14 units.
Jerry has the choice of two bonds, one that pays 5 percent interest and one that pays 2
percent interest. Which of the following is most likely?
a. The 2 percent bond is more risky than the 5 percent bond.
b. The 5 percent bond is a U.S. government bond, and the 2 percent bond is a junk
bond.
c. The 2 percent bond has a longer term than the 5 percent bond.
d. The 2 percent bond is a municipal bond, and the 5 percent bond is a U.S. government
bond.
A German company wants to buy dollars to purchase U.S. bonds. In the open-economy
macroeconomic model of the U.S., this transaction would be accounted for in
a. the supply of currency in the foreign exchange market, and the supply of loanable
funds.
b. the supply of currency in the foreign exchange market, and the demand for loanable
funds.
c. the demand for currency in the foreign exchange market, and the supply of loanable
funds.
d. the demand for currency in the foreign exchange market, and the demand for
loanable funds.
At which interest rate is the present value of $183.60 two years from today equal to
about $173.06 today?
a. 2 percent
b. 3 percent
c. 4 percent
d. 5 percent
Some economists have argued that unemployment insurance improves the ability of the
economy to match each worker with the most appropriate job.
a. True
b. False
If a country exports more than it imports, then it has
a. positive net exports and positive net capital outflows.
b. positive net exports and negative net capital outflows.
c. negative net exports and positive net capital outflows.
d. negative net exports and negative net capital outflows.
If total spending rises from one year to the next, then
a. the economy must be producing a larger output of goods and services.
b. goods and services must be selling at higher prices.
c. either the economy must be producing a larger output of goods and services, or goods
and services must be selling at higher prices, or both.
d. employment or productivity must be rising.
Which of the following is notcorrect?
a. Deficits give people the opportunity to consume at the expense of their children, but
deficits do not require them to do so.
b. Deficits and surpluses could be used to avoid fluctuations in the tax rate.
c. The only times deficits have increased have been during times of war or economic
downturns.
d. Reducing the budget deficit rather than funding more education spending could, all
things considered, make future generations worse off.
Table 3-11
Assume that Max and Min can switch between producing mittens and producing hats at
a constant rate.
Refer to Table3-11. Which of the following points would be on Min’s production
possibilities frontier, based on a 36-hour production period?
a. (3 mittens, 8 hats)
b. (8 mittens, 5 hat)
c. (10 mittens, 4 hats)
d. More than one of the above would be on Min’s production possibilities frontier.
In the short run, which of the following is notcorrect?
a. Increasing the money supply increases the demand for goods and services.
b. Increasing the money supply encourages firms to hire more workers.
c. Lowering the money supply leads to a higher level of unemployment.
d. Policies that encourage higher employment will also induce a lower rate of inflation.
If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal
interest rate is
a. 3.5 percent.
b. 5 percent.
c. 9 percent
d. 7 percent.
Human capital is the term economists use to refer to the knowledge and skills that
workers acquire through education, training, and experience.
a. True
b. False
The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate
during this period was 8 percent. What was the real interest rate during this period?
a. 3 percent
b. 2 percent
c. 3.3 percent
d. 12.8 percent
Figure30-3. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
RefetoFigure30-3. At the end of 2009 the relevant money-supply curve was the one
labeled MS1. At the end of 2010 the relevant money-supply curve was the one labeled
MS2. Assuming the economy is always in equilibrium, what was the economy’s
approximate inflation rate for 2010?
a. -33 percent
b. 17 percent
c. 50 percent
d. 67 percent
A fiscal stimulus was initiated by President Obama in response to the economic
downturn of 2008-2009. At that time, the president’s economists estimated the
multiplier to be
a. 3.2 for government purchases and 2.0 for tax cuts.
b. 2.4 for government purchases and 1.4 for tax cuts.
c. 1.6 for government purchases and 1.0 for tax cuts.
d. 1.6 for government purchases and 0.4 for tax cuts.
Suppose banks decide to hold more excess reserves relative to deposits. Other things
the same, this action will cause the
a. money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds.
b. money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds.
c. money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds.
d. money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.
Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate
is
a. always zero.
b. sometimes zero.
c. rarely zero.
d. never zero.
In the U.S., people are required to pay taxes on
a. nominal interest earnings, irrespective of their real interest earnings.
b. real interest earnings, irrespective of their nominal interest earnings.
c. real capital gains, irrespective of their nominal capital gains.
d. All of the above are correct.
The manager of the bank where you work tells you that your bank has $10 million in
excess reserves. She also tells you that the bank has $400 million in deposits and $375
million dollars in loans. Given this information you find that the reserve requirement
must be
a. 10/400.
b. 25/400.
c. 35/400.
d. 15/400.
When Chile experiences investment from abroad, it experiences, as a result,
a. an increase in productivity.
b. a decrease in Gross National Product (GNP).
c. lower wages for Chilean workers.
d. None of the above is correct.
If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to
a. $5,500 of new money.
b. $5,000 of new money.
c. $4,000 of new money.
d. None of the above is correct.
Fiat money
a. has no intrinsic value.
b. is backed by gold.
c. is a medium of exchange but not a unit of account.
d. is any close substitute for currency such as checkable deposits.
According to the interest-rate effect, an increase in the price level will
a. increase money demand and interest rates. Investment declines.
b. increase money demand and interest rates. Investment increases.
c. increase money demand, reduce interest rates, and investment increases.
d. decrease money demand and interest rates. Investment declines.
In which of the following countries did real GDP per person fall by about 38% from
1991 to 2011?
a. India
b. Singapore
c. Zimbabwe
d. None of the above are correct.
Which of the following statements are positive and which are normative?
a. The minimum wage creates unemployment among young and unskilled workers.
b. The minimum wage ought to be abolished.
c. If the price of a product in a market decreases, then, other things equal, quantity
demanded will increase.
d. A little bit of inflation is worse for society than a little bit of unemployment.
e. There is a tradeoff between inflation and unemployment in the short run.
f. If consumer income increases, then, other things equal, the demand for automobiles
will increase.
g. The U.S. income distribution is not fair.
h. U.S. workers deserve more liberal unemployment benefits.
i. If interest rates increase, then investment will decrease.
j. If welfare benefits were reduced, then the country would be better off.
An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US
dollars. What is the nominal exchange rate if purchasing-power parity holds?
a. 2.0
b. 1.0
c. .50
d. None of the above is correct.
Table 3-17
The following table contains some production possibilities for an economy for a given
year.
RefertoTable3-17.If the production possibilities frontier is bowed outward, then “?”
could be
a. 180.
b. 200.
c. 220
d. 240.
One explanation for long-run unemployment is that it takes time for workers to search
for the jobs that are best suited for them.
a. True
b. False
The circular-flow diagram is an example of
a. a laboratory experiment.
b. an economic model.
c. a mathematical model.
d. All of the above are correct.
M1 includes
a. currency.
b. demand deposits.
c. traveler’s checks.
d. All of the above are correct.
According to purchasing-power parity, if the price of a basket of goods in the U.S. rose
from $2,000 to $2,104 and the price of the same basket of goods rose from 800 units to
832 units of some other country’s currency, then the
a. nominal exchange rate would appreciate.
b. nominal exchange rate would depreciate.
c. real exchange rate would appreciate.
d. real exchange rate would depreciate.