An increase in the demand for bonds will increase both the price of bonds and the
quantity of bonds held.
If the market supply curve slopes upward
The law of diminishing marginal utility
Because of the free rider problem
If production of a good creates negative externalities, then the market
Rich lost his job six months ago because of budget cuts at the county landfill where he
worked. He tried finding another job, but has not actively searched for work for three
months. Rich would be considered by the Bureau of Labor Statistics to be
a. frictionally unemployed and would be counted in the official unemployment rate
b. seasonally unemployed and would be counted in the official unemployment rate
c. structurally unemployed and would be counted in the official unemployment rate
d. cyclically unemployed and would be counted in the official unemployment rate
e. a discouraged worker
If we look at governmental budgets over time using nominal figures, we
a. have a clearer understanding of the real size of the budget
b. are able to focus on the real impact of government spending on potential GNP
c. tend to overestimate the size of the budgetary growth
d. usually underestimate the size of the burden of the debt
e. are ignoring what we can learn from nominal data
What short-run choice does the Phillips curve illustrate?
a. The choice between higher real wages and higher output
b. The choice between cyclical unemployment and frictional unemployment
c. The choice between a higher capital stock and inflation
d. The choice between higher output per capita and maintaining the natural rate of
unemployment
e. The choice between unemployment and inflation
If Armenia can produce two rugs or 100 spy novels in an hour, and Turkey can produce
one rug or 50 spy novels in an hour,
a. the terms of trade are 50 spy novels per rug, and Turkey should produce both rugs
and spy novels
b. the terms of trade are 50 spy novels per rug, and Turkey should produce only rugs
c. the terms of trade are 50 spy novels per rug, and Armenia should produce only rugs
d. there are no gains from trade
e. the terms of trade are will exceed 50 spy novels per rug, and Armenia should produce
both rugs and spy novels
The money market achieves equilibrium when
a. individuals no longer want to spend their money
b. the price of bonds rises by an appropriate amount
c. buyers and sellers agree on a price for commodities
d. speculative balances are reduced to a minimum
e. individuals who hold bonds are satisfied with what they are holding
Where is the interest rate determined in the classical model?
a. In the goods market
b. In the loanable funds market
c. By the federal government
d. By the Fed
e. Where aggregate expenditure equals GDP.
What effect did the Iraqi invasion of Kuwait have on the U.S. economy?
a. A rightward shift of the aggregate demand curve
b. It had no effect
c. A downward shift of the aggregate supply curve
d. A leftward shift of the aggregate demand curve
e. An upward shift of the aggregate supply curve
In Figure 16-3, the opportunity cost in Panama of producing one additional rug is
Figure 16-3
Quantities of goods that can be produced in one day with available resources:
a. 4 bicycles
b. 5 bicycles
c. 1/4 of a bicycle
d. 1/5 of a bicycle
e. 2 bicycles
The aggregate supply curve is found by summing up the supply curves for all the
different products in the economy.
If the Fed wants to increase the interest rate, it will
a. buy bonds and increase the money supply.
b. buy bonds and decrease the money supply.
c. sell bonds and increase the money supply.
d. sell bonds and decrease the money supply.
e. sell bonds and increase money demand.
One way that natural monopolies are typically regulated is
Suppose the MPC is 0.85. If government purchases increase by $10 billion and net
taxes fall by $10 billion, equilibrium output will
a. fall by $10 billion
b. increase by $10 billion
c. increase by $20 billion
d. increase by $66.7 billion
e. increase by $123.3 billion
An investment tax credit will lead to
a. a lower equilibrium interest rate in equilibrium
b. a decrease in household consumption spending in equilibrium
c. slower economic growth
d. lower equilibrium investment in physical capital
e. a increase in household consumption spending
You are thinking of buying a 10-year bond on the secondary bond market. The face
value of the bond is $10,000, the interest rate is 5 percent (0.05) per year, and the bond
was issued exactly eight years ago. What is the value of the bond today?