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In the short run following a depreciation of the dollar, the United States may move
downward along the J-curve since it is likely that the United States
a. spends more dollars on imports.
b. spends fewer dollars on imports.
c. sells an increased dollar amount of exports.
d. sells a reduced dollar amount of exports.
Exhibit 2-3
If PPF1 is the relevant production possibilities frontier, PPF2 may depict
a. economic growth.
b. an increase in resources.
c. an increase in technology.
d. both b and c
e. all of the above
Which of the following statements is true?
a. The motivation to try to explain something is at the heart of building a theory.
b. If a theory makes people uncomfortable then it should be discarded or ignored.
c. In order for a theory to be valid it must be a perfect description of reality.
d. Building a theory and evaluating a theory are the same thing.
Profit can be earned by buying _____________ and selling ____________________.
a. at one price; at the same price
b. low; high
c. high: low
d. none of the above
Lowering the required reserve ratio raises the simple deposit multiplier.
a. True
b. False
Some of the benefits of globalization include
a. increased international trade.
b. greater income per person.
c. lower prices for goods.
d. greater product variety.
e. all of the above
Exhibit 16-8
Assume that the starting point is point 1.Suppose that the Fed implements expansionary
monetary policy that raises aggregate demand.Which of the following best goes with
the diagram shown?
a. New classical theory with policy incorrectly anticipated, bias downward
b. New classical theory with policy incorrectly anticipated, bias upward
c. Real business cycle theory
d. New classical theory with policy unanticipated
e. Policy ineffectiveness proposition (PIP)
Exhibit 10-9
What is the value of the marginal propensity to consume (MPC) that would correctly
fill in blank (C) and the marginal propensity to save (MPS) that would correctly fill in
blank (D)?
a. 0.90; 0.10
b. 0.10; 10
c. 0.90; 9
d. 0.01; 100
Investment is equal to all purchases of newly produced capital goods
a. minus changes in business inventories.
b. plus fixed investment minus inventory investment.
c. plus changes in business inventories.
d. plus changes in business inventories plus purchases of new residential housing.
Individuals want nonexcludable public good X, but the market does not provide it
because of the free rider problem.Government overcomes the free rider problem by
______________ individuals and then either producing good X itself or paying
someone to produce it.
a. forcing individuals to work longer hours
b. taxing
c. surveying
d. subsidizing
e. none of the above
When an investor buys shares of stock, those stocks must be held for a specified period
of time before they can be sold.
a. True
b. False
If the price of a good ____________, the demand for its complements will __________.
a. rises; fall
b. falls; rise
c. falls; fall
d. rises; rise
e. a and b
At college X and at college Y, students pay $3,000 less than the equilibrium tuition. If
the supply of openings is the same at both colleges, it follows that a shortage of
openings will be greater at
a. college X than college Y.
b. college X than the surplus at college Y.
c. college Y than the surplus at college X.
d. college X than college Y if the demand is greater at college X.
e. €college X than college Y if the demand is less at college X.
Exhibit 16-3
The economy is at point A. As the result of an unexpected increase in aggregate
demand, in the short run, the Friedman natural rate theory would predict
a. movement to point B.
b. movement to point C.
c. movement to point C'.
d. no movement from point A.
If hot dogs are an inferior good, a decrease in income will cause the equilibrium price
of hot dogs to rise.
a. True
b. False
Both Jones and Smith agree that the economy is in a recessionary gap. Jones proposes a
tax cut and believes that it will raise Real GDP and lower the price level. Smith agrees
that a tax cut will raise Real GDP, but he argues that it will not lower the price level in
the short run.It follows that
a. both Jones and Smith believe that lower taxes will shift the AD curve rightward, but
will not shift the SRAS curve.
b. both Jones and Smith believe that lower taxes will shift the SRAS curve rightward,
but will not shift the AD curve.
c. Jones believes that the tax cut will shift the SRAS curve rightward and the AD curve
will not shift.Smith believes that the AD curve will shift rightward and the SRAS curve
will not shift.
d. Smith believes that the tax cut will shift the SRAS curve rightward and the AD curve
will not shift.Jones believes that the AD curve will shift rightward and the SRAS curve
will not shift.
Exhibit 4-9
Suppose that the government imposes a price ceiling at a price of $15.The number of
units that would be exchanged in this market would be
a. 150, since that is the equilibrium quantity and the price ceiling is above the
equilibrium price.
b. 80, since that is the number of units demanded at the price ceiling.
c. 260, since that is the number of units supplied at the price ceiling.
d. 170, since that is the average of the quantity demanded and the quantity supplied at
the price ceiling.
