Countries that engage in trade will tend to specialize in goods in which they have _____
and will _____ those goods.
A) a comparative advantage; import
B) an absolute advantage; export
C) a comparative advantage; export
D) an economic profit; import
Economists usually use GDP rather than GNP because they are tracking:
A) only transactions on the current account.
B) only transactions on the financial account.
C) production rather than income.
D) income rather than production.
In an economy with no taxes or imports, if the marginal propensity to consume
increases, the marginal propensity to save will:
A) increase.
B) decrease.
C) remain constant.
D) fluctuate randomly.
An increase in the value of a fixed rate currency is called a revaluation.
A) True
B) False
Janet Yellen is:
A) chair of the Board of Governors of the Federal Reserve System.
B) an AIG executive who received large bonuses.
C) a Supreme Court justice who ruled that budget deficits are unconstitutional.
D) a financial adviser on CNBC.
The marginal propensity to save is:
A) savings divided by aggregate income.
B) the fraction of an additional dollar of disposable income that is saved.
C) 1 + MPC.
D) savings divided by aggregate income, or 1 + MPC.
Your textbook costs $90, and you can resell it in one year for $45. If the annual interest
rate is 10%, then the present value of the textbook’s resale value (to the nearest dollar)
is:
A) $90.
B) $41.
C) $45.
D) $37.
Suppose oranges and clementines are considered to be substitutes. Holding everything
else constant, if the price of oranges increases, then the demand for _____ will _____.
A) clementines; increase
B) clementines; decrease
C) oranges; increase
D) oranges; decrease
If you borrow money from a bank to buy a house, the mortgage (loan) is a financial
asset for you and a liability for the bank.
A) True
B) False
Figure: Exchange Market Intervention
Look at panel (a) in the figure Exchange Market Intervention. Which of the following
approaches could the Genovian government use to raise the value of the geno above its
present equilibrium exchange rate and into the target range?
A) use its own currency to buy U.S. dollars
B) shift the demand for genos to the right by raising interest rates in Genovia
C) eliminate the exchange controls that limit the right of Genovian citizens to buy U.S.
dollars
D) tighten the exchange controls that limit purchases of U.S. dollars by Genovian
citizens
In a simple economy with no taxes, government spending, exports, or imports, if
disposable income increases by $100 and $30 is saved, _____ is consumed.
A) $30
B) $70
C) $100
D) $170
The skills, training, and education possessed by workers that contribute to economic
growth are known as:
A) saving.
B) human capital.
C) natural resources.
D) output of labor.
An inflationary gap is automatically closed by _____ wages that shift the SRAS curve
_____.
A) falling; rightward
B) falling; leftward
C) rising; rightward
D) rising; leftward
If the interest rate is below equilibrium, then the quantity of money demanded is more
than the quantity of money supplied, and the quantity of interest-bearing financial assets
demanded is also more than the quantity supplied.
A) True
B) False
Figure: Short- and Long-Run Equilibrium
Look at the figure Short- and Long-Run Equilibrium. If the economy is at equilibrium
at E1, the government should use _____ fiscal policy to shift the aggregate demand
curve to the _____ .
A) expansionary; right
B) expansionary; left
C) contractionary; right
D) contractionary; left
A reduction in the value of a fixed rate currency is called a devaluation.
A) True
B) False
Look at the table The Production Possibilities for Tractors and Crude Oil. In Mexico the
opportunity cost of producing 150,000 barrels of crude oil is _____ tractors.
A) 50
B) 70
C) 90
D) 160
Customers used to pay inside before pumping gas. When gas stations introduced paying
at the pump, thus decreasing production costs, there was a shift to the _____ in the
_____ curve and _____ pressure on gas prices.
A) right; supply; eased
B) left; supply; increased
C) right; demand; increased
D) left; demand; eased
Which of the following happen(s) when real GDP grows more slowly than potential
GDP?
A) The output gap becomes more positive.
B) The output gap and the unemployment rate both increase.
C) The output gap and the unemployment rate both decrease.
D) The unemployment rate rises.
The interest rate effect is the tendency for changes in the price level to affect:
A) the quantity of investment demanded and thus interest rates.
B) export demand and thus aggregate demand.
C) interest rates and thus the quantity of investment spending and consumption.
D) real incomes and lead to shifts in potential output.
Over the past 100 years, the rate of return on stocks has averaged about _____, and the
return on bonds has averaged approximately _____.
A) 20%; 25%
B) 1%; 2%
C) “10%; 5%
D) 7%; 2%
The behavior of the balance of payments on goods and services is determined in the
international _____ market.
A) goods and services
B) loanable funds
C) money
D) stock
When the economy expands, income tax receipts will:
A) rise, but sales tax revenues will remain the same.
B) fall, but sales tax revenues will rise.
C) stay the same unless the government changes the tax rates.
D) rise, and sales tax revenues will rise.
When the central bank acts as a lender of last resort, it:
A) raises reserve requirements.
B) reduces reserve requirements.
C) provides a liquidity trap.
D) provides funds to financial institutions that cannot borrow from the private credit
markets.
A pie chart is used to depict information about:
A) the relative shares of categories of data.
B) the changes of a particular variable over time.
C) positive, not negative, relationships among variables.
D) the changes of a particular variable over time and positive relationships.
If Jenny’s income is $120,000 and the price level is 4, then Jenny’s real income is
$30,000.
A) True
B) False
Figure: Consumption and Disposable Personal Income
Look at the figure Consumption and Disposable Personal Income. When disposable
personal income is $1,200 billion, consumption is _____ billion.
A) $600
B) $800
C) $1,200
D) $2,000
If macroeconomic policy has been successful over time, it is likely that the economy
has not seen:
A) any inflation.
B) any severe recessions.
C) any unemployment.
D) a business cycle.
The table shows the maximum amount of fish and coconuts that Tom and Hank can
produce if they produce only one good. Tom produces and consumes nine fish and two
coconuts, and Hank produces and consumes three fish and two coconuts. Now they
decide to engage in trade. Which of the following statements is INCORRECT?
A) For both to become better off, each should specialize in the production of some
good. However, since Hank is equally productive in both goods, it doesn’t matter which
good each specializes in.
B) For both to become better off, each should specialize completely in the production of
the good in which he has a comparative advantage.
C) After trade it is possible for Tom to consume 9 fish and 2.5 coconuts and for Hank to
consume 3 fish and 2.5 coconuts.
D) For each individual, the consumption point after trade will lie outside that
individual’s production possibility frontier.
The expansion and collapse of the housing market in Ft. Myers between 2003 and 2010
is primarily an example of how changes in investment spending can affect consumer
spending and the entire economy.
A) True
B) False
Which of the following is near-money?
A) a traveler’s check
B) a credit card
C) a debit card
D) a savings account
Scenario: The Production of Wheat and Toys
The table describes the production of two goods, wheat and toys, in country A and
country B. Each country has a linear production possibility frontier with respect to its
production of the two goods. The numbers in each column represent the total number of
units each country could produce if it used all of its resources to produce the good.
Look at the scenario Production of Wheat and Toys. If each country specializes
completely in the good for which it has the comparative advantage, which combination
represents a maximum possible amount of total production of the two goods, given the
specialization?
A) 50 wheat and 100 toys
B) 50 wheat and 75 toys
C) 25 wheat and 75 toys
D) 100 toys and 25 wheat
Public debt is government debt held by individuals and institutions outside the
government.
A) True
B) False
Budget deficits almost always:
A) decrease with inflation and increase with deflation.
B) increase when unemployment increases and fall when unemployment falls.
C) decrease when unemployment increases and increase when unemployment falls.
D) increase when the aggregate price level increases and fall when the aggregate price
level falls.