Other things the same, continued technological progress and continued increases in the
money supply would unambiguously lead to
a. rising prices only.
b. rising real GDP only.
c. rising prices and rising real GDP.
d. neither rising prices nor rising real GDP.
A farm equipment retailer in Azerbaijan exchanges Azerbaijan manats (the currency of
Azerbaijan) for $300,000 a bank in Azerbaijan was holding. It uses the $300,000 to buy
farm equipment from a U.S. company. The U.S. company deposits half of these funds
in a U.S. bank and exchanges the other half for euros from a bank in London.
As a result of these transactions, by how much, if at all, and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?
If a central bank reduced inflation by 2 percentage points and that made output fall by 1
percentage points for 2 years and the unemployment rate rise from 3 percent to 5
percent for 2 years, the sacrifice ratio is
a. 1/2.
b. 1.
c. 2.
d. 4.
At the equilibrium price, quantity demanded is equal to quantity supplied.
a. True
b. False
What would happen to the equilibrium price and quantity of latts if the cost of
producing steamed milk, which is used to make latts, rises?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
The main explanation for the lower growth rate for the American economy in the 21st
century compared to the previous 250 years is
a. higher minimum wages.
b. that although Americans are working more, they are more distracted by technology
and therefore are less productive at work.
c. that Americans are working less.
d. the increasing labor-force participation rates of women with young children.
Table 4-3
RefertoTable4-3. For whom is the good a normal good?
a. Bert only
b. Grover only
c. Bert, Ernie, Grover, and Oscar
d. This cannot be determined from the table.
Figure27-3
The following figure shows the utility function for Paul.
RefertoFigure27-3.Suppose Paul begins with $900 in wealth. Starting from there,
a. Paul would be willing to accept a coinflip bet that would result in him winning $200
if the result was “heads” or losing $200 if the result was “tails.”
b. the pain of losing $200 of his wealth would equal the pleasure of adding $200 to his
wealth.
c. the pain of losing $200 of his wealth would exceed the pleasure of adding $200 to his
wealth.
d. the pleasure of adding $200 to his wealth would exceed the pain of losing $200 of his
wealth.
Table 3-5
Assume that Aruba and Iceland can switch between producing coolers and producing
radios at a constant rate.
Refer to Table3-5. Which of the following combinations of coolers and radios could
Aruba produce in one 40- hour week?
a. 3 coolers and 7 radios
b. 5 coolers and 6 radios
c. 11 coolers and 4 radios
d. 13 coolers and 3 radios
Suppose that the U.S. imposes an import quota on lumber. The quota makes the real
exchange rate of the U.S. dollar
a. appreciate but does not change the real interest rate in the United States.
b. appreciate and the real interest rate in the United States increase.
c. depreciate and the real interest rate in the United States decrease.
d. depreciate but does not change the real interest rate in the United States.
Suppose that the economy is at long-run equilibrium. If there is a sharp rise in the stock
market combined with a significant increase in the minimum wage, then in the short run
a. real GDP will rise and the price level might rise, fall, or stay the same.
b. real GDP will fall and the price level might rise, fall, or stay the same.
c. the price level will rise, and real GDP might rise, fall, or stay the same.
d. the price level will fall, and real GDP might rise, fall, or stay the same.
Given that a country’s real output has increased, in which of the following cases can we
be sure that its productivity also has increased?
a. The total number of hours worked rose.
b. The total number of hours worked stayed the same.
c. The total number of hours worked fell.
d. Both b and c are correct.
An individual deciding how to allocate her limited time is dealing with both scarcity
and trade-offs.
a. True
b. False
Figure 3-20
RefertoFigure3-20.Canada has a comparative advantage in the production of
a. Good X and Mexico has a comparative advantage in the production of Good Y.
b. Good Y and Mexico has a comparative advantage in the production of Good X.
c. both goods and Mexico has a comparative advantage in the production of neither
good.
d. neither good and Mexico has a comparative advantage in the production of both
goods.
Suppose price is measured along the vertical axis on a graph. When price changes, there
will be a
a. rotation of the curve.
b. shift of the curve.
c. movement along the curve.
d. change in the slope of the curve.
For the most part, fiscal policy affects the economy in the short run while monetary
policy primarily matters in the long run.
a. True
b. False
Other things the same, the aggregate quantity of output supplied will decrease if the
price level
a. is lower than expected so that firms believe the relative price of their output has
increased.
b. is lower than expected so that firms believe the relative price of their output has
decreased.
c. is higher than expected so that firms believe the relative price of their output has
increased.
d. is higher than expected so that firms believe the relative price of their output has
decreased.
The Bureau of Labor Statistics places people in the “employed” category if they
a. are temporarily absent from their jobs.
b. are self-employed.
c. work without pay in a family member’s business.
d. All of the above are correct.
Critics of stabilization policy argue that
a. policy affects aggregate demand quickly, but the effects on aggregate demand are
long-lived.
b. policy affects aggregate demand with a lag, and the effects on aggregate demand are
long-lived.
c. policy affects aggregate demand with a lag, but the effects are short-lived.
d. policy does not affect aggregate demand.
According to 2012 data on the U.S. population, which of the following was correct?
a. Adults of prime working age (ages 25-54) had both higher labor-force participation
rates and higher rates of unemployment compared to teenagers.
b. Adults of prime working age (ages 25-54) had higher labor-force participation rates
and lower rates of unemployment compared to teenagers.
c. Adults of prime working age (ages 25-54) had both lower labor-force participation
rates and lower rates of unemployment compared to teenagers.
d. Adults of prime working age (ages 25-54) had lower labor-force participation rates
and higher rates of unemployment compared to teenagers.
An increase in inflation expectations shifts the short-run Phillips curve right and has no
effect on the long-run Phillips curve.
a. True
b. False
Table 4-13
The demand schedule below pertains to sandwiches demanded per week.
RefertoTable4-13.Regarding Harry and Darby, for whom are sandwiches a normal
good?
a. only for Harry
b. only for Darby
c. for both Harry and Darby
d. This cannot be determined from the given information.
If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase
$300 billion worth of U.S. assets,
a. U.S. net capital outflow is $300 billion; capital is flowing into the U.S.
b. U.S. net capital outflow is $300 billion; capital is flowing out of the U.S.
c. U.S. net capital outflow is -$300 billion; capital is flowing into the U.S.
d. U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.
Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam’s
purchase is
a. foreign direct investment. By itself it increases U.S. net capital outflow.
b. foreign direct investment. By itself it decreases U.S. net capital outflow.
c. foreign portfolio investment. By itself it increases U.S. net capital outflow.
d. foreign portfolio investment. By itself it decreases U.S. net capital outflow.
Historically, the change in real GDP during recessions has been
a. mostly a change in investment spending.
b. mostly a change in consumption spending.
c. about equally divided between consumption and investment spending.
d. sometimes mostly a change in consumption and sometimes mostly a change in
investment.
The short-run Phillips curve is based on the classical dichotomy.
a. True
b. False
Which of the following do unions not cause?
a. frictional unemployment
b. the wage to rise above the equilibrium level
c. conflict between insiders who benefit from high union wages and outsiders who do
not get the union jobs
d. reduced wages in industries without unions
Which of the following is notcorrect?
a. Most people who become unemployed will soon find jobs.
b. In an ideal labor market, wages would adjust to ensure that all workers are always
fully employed.
c. The unemployment rate occasionally falls to zero.
d. There are always some workers without jobs, even when the overall economy is
doing well.
New cars are normal goods. What will happen to the equilibrium price of new cars if
the price of gasoline rises, the price of steel falls, public transportation becomes cheaper
and more comfortable, auto-workers accept lower wages, and automobile insurance
becomes more expensive?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.
Once an idea enters society’s pool of knowledge, the idea becomes a
a. societal good.
b. private good.
c. public good.
d. proprietary good.
In the long-run, an increase in aggregate demand increases the price level, but not real
GDP.
a. True
b. False
Which of the following is correct concerning diversification?
a. It only reduces firm-specific risk, but most of the reduction comes from increasing
the number of stocks in a portfolio to well above 30.
b. It only reduces firm-specific risk; much of the reduction comes from increasing the
number of stocks in a portfolio from 1 to 30.
c. It only reduces market risk, but most of the reduction comes from increasing the
number of stocks in a portfolio to well above 30.
d. None of the above is correct.
Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells
broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume
that if Jennifer marries either, they give her what they use to sell her. Which of the
following statements is consistent with the way GDP is computed?
a. GDP will fall if Jennifer marries either Darin or Thomas.
b. GDP will fall if Jennifer marries Darin but not if she marries Thomas.
c. GDP will fall if Jennifer marries Thomas but not if she marries Darin.
d. GDP remains the same whether Jennifer marries Darin or Thomas.
The president of a poor country has announced that he will implement the following
measures which he claims are designed to increase growth: 1. Reduce corruption in the
legal system; 2. Reduce reliance on market forces because they allocate goods and
services in an unfair manner; 3. Restrict investment in domestic industries by foreigners
because they take some of the profits out of the country; 4. Encourage trade with
neighboring countries; and 5. Increase the fraction of GDP devoted to consumption.
How many of these measures will have a positive effect on growth?
a. 1
b. 2
c. 3
d. 4
Financial crises seldom involve economic downturns.
a. True
b. False