If inflation is correctly anticipated, in a transaction between borrowers and lenders,
inflation
a. will not reduce purchasing power of the money paid back
b. will redistribute purchasing power from borrowers to lenders
c. will not redistribute purchasing power
d. will redistribute purchasing power from to lenders to borrowers
e. cannot be taken into consideration when a loan is negotiated
If the U.S. inflation rate falls relative to the Mexican inflation rate, which of the
following will happen in the market for pesos?
a. A rightward shift of the demand curve, a leftward shift of the supply curve, and an
appreciation of the peso
b. A leftward shift of the demand curve, a rightward shift of the supply curve, and an
appreciation of the peso
c. A leftward shift of the demand curve, a leftward shift of the supply curve, and a
depreciation of the peso
d. A rightward shift of the demand curve, a rightward shift of the supply curve, and an
appreciation of the peso
e. A leftward shift of the demand curve, a rightward shift of the supply curve, and a
depreciation of the peso.
The classical model
a. is another name for the short-run macro model
b. was developed to explain the long period of poor economic performance during the
Great Depression
c. is an attempt to explain why the economy tends to perform rather well over long
periods of time
d. is believed by most economists to be a better explanatory model for short-term,
rather than long-term, economic performance
e. was not really accepted as a legitimate economic theory until the 1950s
During a recession, a rising unemployment rate is
a. rare
b. stimulating higher levels of inflation
c. predicted by the classical model
d. the basis for a new economics expansion
e. almost inevitable
Although loans in the federal funds market are very short term, such as daily, the
federal funds rate is stated as an annual rate of return.
The economy’s long-run aggregate supply curve
a. never shifts
b. indicates that in the long run, the price level is constant
c. is shifted by demand shocks
d. is a vertical line at the full-employment level of output
e. is perfectly elastic
The Fed sometimes acts as a lender of last resort. This means that
a. individuals can borrow from the Fed when the President declares a national disaster
b. individuals can try to borrow money from the Fed if they are unable to borrow from a
bank
c. banks can always go to the Fed for reserves in order to purchase more government
bonds
d. banks can always go to the Fed for reserves to meet their obligations to depositors
e. business firms can try to borrow money from the Fed they are unable to borrow from
a bank
The most dramatic and rapid increases and decreases in exchange rates occur in the
a. very short run
b. short run
c. long run
d. very long run
e. triangular arbitrage market
An increase in quantity supplied can be caused by a(n)
a. decrease in quantity demanded
b. rise in resource input prices
c. increase in price
d. decrease in the number of firms in the market
e. tax levied on the producer
When is the U.S. economy at full employment?
a. When there is no cyclical unemployment
b. When there is no structural unemployment
c. When there is no full employment
d. When there is no seasonal unemployment
e. When there is no frictional unemployment
Macro National Bank, a commercial bank, holds $1 million in vault cash, $15 million in
government and corporate bonds, $40 million in demand deposits, $10 million on
deposit with a Federal Reserve bank, and $8 million worth of property. What are Macro
National Bank’s total liabilities?
a. $40 million
b. $48 million
c. $50 million
d. $51 million
e. $65 million
In 2008, net exports in the U.S. were
a. $1,831 billion.
b. -$2,539 billion.
c. -$900 billion.
d. -$1,500 billion.
e. -$708 billion.
When all resources used in production are not perfectly substitutable,
a. specialization does not lead to greater production
b. the economy or firm is producing at a point outside of its production possibilities
frontier
c. there will be constant opportunity costs
d. the production possibilities frontier will be concave (bowed outward)
e. the economy or firm will only produce one good in equilibrium
The vertical intercept of the consumption function measures autonomous consumption.
It represents the combined impact on consumption spending of all factors other than
disposable income.
What an economic decision maker must give up when choosing one economic activity
over others is known as the
a. alternative cost
b. decision cost
c. foregone cost
d. opportunity cost
e. accounting cost
Gross domestic product (GDP) is
a. the total value of all goods and services produced for the marketplace during a given
period, within a nation’s borders
b. the total value of all final goods and services produced for the marketplace during a
given period, by a nation’s citizens and businesses, both within a nation’s borders and
abroad
c. the total value of all final goods and services produced for the marketplace during a
given period, within a nation’s borders
d. the total value of all goods and services produced for the marketplace during a given
period, by a nation’s citizens and businesses
e. the total value of all goods, services and inputs produced for the marketplace during a
given period, within a nation’s borders
Which of the following components of spending is not treated as a given value in the
short-run macro model?
a. Net exports
b. Imports
c. Investment spending
d. Consumption spending
e. Government spending
Goodyear produces tires for automobiles, 50,000 in all. Suppose 40,000 go on new cars
and are sold as part of each car, while the other 10,000 are produced as replacement
tires and are sold individually. How many tires would be counted in current GDP?
a. 50,000, because everything produced is counted
b. 40,000 because only the ones on new cars are counted
c. 10,000 because 40,000 will be counted in the value of the new cars
d. 0 because they are all intermediate goods
e. 10,000 because they are the only €final€ goods and services in the total
If bond prices rise in the secondary market,
a. the interest rate rises in the secondary market
b. the interest rate rises in the primary market
c. this has no impact on the primary market
d. they fall in the primary market
e. they also rise in the primary market
Both the supply and demand curves can shift due to changes in income.