Money is
a. only assets such as gold and silver
b. only fiat in nature
c. anything that is generally accepted as a means of payment
d. acceptable as a means of payment because the government guarantees that it must be
e. only those things backed by gold
The cross-price elasticity of demand is useful for determining which pairs of
commodities serve as substitutes for each other.
Refer to Figure 9-5. An increase in the supply of loanable funds from S1to S2will,
everything else equal,
a. lower the interest rate to 6 percent and investment spending to $350 billion
b. leave the interest rate and investment spending unchanged
c. lower the interest rate to 6 percent and increase investment spending to $500 billion
d. lower the interest rate to 6 percent and increase investment spending to $550 billion
e. lower the interest rate to 6 percent and keep investment spending at $400 billion
Consider the production possibilities frontier for food and clothing in Figure 2-10. A
movement from point J to point K could be caused by
Figure 2-10
In the short run, a decrease in government purchases would
a. decrease real GDP because of the multiplier effect and price level changes, but be
offset somewhat by decreases in the interest rate
b. decrease real GDP because of the increases in the price level and increases in the
interest rate
c. decrease real GDP because of the multiplier effect and increase in the interest rate,
but be offset somewhat by decreases in the price level
d. decrease real GDP because of the multiplier effect, but be offset somewhat by
decreases in the price level and the interest rate
e. not change output because of the multiplier effect; price level and interest rate
changes completely cancel each other out
If people come to expect ongoing inflation, what will happen over time independent of
the Fed’s response?
a. The long-run aggregate supply curve will shift to the right.
b. The aggregate supply curve will continue to shift upward.
c. The aggregate demand curve will continue to shift to the right.
d. The aggregate supply curve will continue to shift downward.
e. The aggregate demand curve will continue to shift to the left.
Which of the following is an injection in an open economy?
a. Saving
b. Imports
c. Exports
d. Taxes
e. Money
What will be the effects of a decrease in government spending?
a. an increase in equilibrium GDP, a decrease in money demand, a decrease in the
interest rate, and an increase in investment spending
b. a decrease in equilibrium GDP, a decrease in money demand, an increase in the
interest rate, and a decrease in investment spending
c. an increase in equilibrium GDP, an increase in money demand, an increase in the
interest rate, and an increase in investment spending
d. a decrease in equilibrium GDP, a decrease in money demand, a decrease in the
interest rate, and an increase in investment spending
e. an increase in equilibrium GDP, an increase in money demand, an increase in the
interest rate, and a decrease in investment spending
With an income elasticity of demand of 0.5, cigarettes are an example of
If food is measured on the horizontal axis of a budget line diagram, and clothing is
measured on the vertical axis, the slope of the budget line
The assumption that labor markets clear makes it very easy for the classical model to
explain expansions.
Suppose a perfectly competitive market is in equilibrium, and then market supply
increases. Which of the following would happen?
Which of the following could lead to a bank’s failure, even if the bank has positive net
worth?
a. The bank may encounter difficulty selling its government bonds.
b. Most of the bank’s liabilities are illiquid.
c. A bank with positive net worth cannot fail.
d. The bank may encounter difficulty borrowing reserves from the Federal Reserve.
e. Most of the bank’s assets are illiquid.
Which of the following is not considered an automatic stabilizer?
a. Food stamp program for people with low incomes
b. Welfare program for families with dependent children
c. Medicaid, a health program for the poor
d. Financial assistance for disabled people
e. Unemployment programs that pay benefits to those who lose their jobs
The aggregate supply curve is
a. vertical in the short run
b. horizontal in the short run
c. the sum of all of the supply curves of individual firms in the economy
d. downward sloping in the short run
e. upward sloping in the short run
A government-imposed price ceiling set below the market’s equilibrium price will
create an excess demand for a product. As a result of the excess demand, either the
demand curve will tend to shift to the left or the supply curve will shift to the right-or
both.
Positions that involve a considerable amount of personal risk
Economists maintain that the wage rate that workers should really care about is
a. both the real wage rate and the nominal wage rate
b. the nominal wage rate
c. the nominal wage rate multiplied by the real wage rate
d. neither the real wage rate nor the nominal wage rate
e. the real wage rate
Microsoft issues a 2-year bond with a face value of $5,000. In addition to the principal
paid at maturity, the bond has 2 annual coupon payments of $500 each, to be received at
the end of the first and second year respectively. If the interest rate is 10 percent (0.10)
per year, what is the value of the newly issued bond?