Suppose the United States unexpectedly decided to pay off its debt by printing new
money. Which of the following would happen?
a. People who held money would feel poorer.
b. Prices would rise.
c. People who had lent money at a fixed interest rate would feel poorer.
d. All of the above are correct.
A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese
firm then uses the dollars to purchase $60,000 of canning equipment from a U.S.
company. As a result of these two transactions alone
a. both U.S. net capital outflow and U.S. net exports rise.
b. U.S. net capital outflow rose and U.S. net exports fall.
c. U.S. net capital outflow fell and U.S. net exports rise.
d. both U.S. net capital and U.S. net exports fall.
The Wagner Act of 1935
a. prevents unions from acting as cartels.
b. allows workers joining a unionized firm to choose not to join the union.
c. prevents employers from interfering when workers try to organize a union.
d. prevents firms from hiring permanent replacements for workers who are on strike.
The consumer price index and the GDP deflator are two alternative measures of the
overall price level. Which of the following statements about the two measures is
correct?
a. The two measures are constructed differently, but they always indicate the same
inflation rate.
b. The substitution bias applies equally to both measures.
c. A change in the price of Korean televisions is reflected in the U.S. consumer price
index but not in the U.S. GDP deflator.
d. All of the above are correct.
In general, the longest lag for
a. both fiscal and monetary policy is the time it takes to change policy.
b. both fiscal and monetary policy is the time it takes for policy to affect aggregate
demand.
c. monetary policy is the time it takes to change policy, while for fiscal policy the
longest lag is the time it takes for policy to affect aggregate demand.
d. fiscal policy is the time it takes to change policy, while for monetary policy the
longest lag is the time it takes for policy to affect aggregate demand.
Studies have shown that the design of the unemployment insurance system reduces the
job search effort of the unemployed.
a. True
b. False
Table 3-4
Assume that Andrea and Paul can switch between producing wheat and producing beef
at a constant rate.
Refer to Table3-4. Assume that Andrea and Paul each has 480 minutes available. If
each person divides his time equally between the production of wheat and beef, then
total production is
a. 24 bushels of wheat and 64 pounds of beef.
b. 21 bushels of wheat and 33 pounds of beef.
c. 16 bushels of wheat and 48 pounds of beef.
d. 5 bushels of wheat and 24 pounds of beef.
If Kindle e-readers and Nook e-readers are substitutes, a higher price for Nooks would
result in a(n)
a. increase in the demand for Nooks.
b. decrease in the demand for Nooks.
c. increase in the demand for Kindles.
d. decrease in the demand for Kindles.
Table 3-10
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Refer to Table3-10. We could use the information in the table to draw a production
possibilities frontier for Japan and a second production possibilities frontier for Korea.
If we were to do this, measuring cars along the horizontal axis, then
a. the slope of Japan’s production possibilities frontier would be 5 and the slope of
Korea’s production possibilities frontier would be -3.
b. the slope of Japan’s production possibilities frontier would be 0.2 and the slope of
Korea’s production possibilities frontier would be -0.33.
c. the slope of Japan’s production possibilities frontier would be 0.2 and the slope of
Korea’s production possibilities frontier would be 0.33.
d. the slope of Japan’s production possibilities frontier would be 5 and the slope of
Korea’s production possibilities frontier would be 3.
RefertoFigure2-9,Panel(a).Production at point K is
a. possible and efficient.
b. possible but inefficient.
c. impossible but efficient.
d. impossible and inefficient.
According to Friedman and Phelps, the unemployment rate
a. is never below its natural rate.
b. is below its natural rate when actual inflation is greater than expected inflation.
c. is below its natural rate when actual inflation is less than expected inflation.
d. is below its natural rate when actual inflation equals expected inflation.
Suppose a country reduces restrictions on how many hours people can work. If
reducing these restrictions increase the total number of hours worked in the economy,
but all other factors that determine output are held fixed, then
a. productivity and output both rise.
b. productivity rises and output falls.
c. productivity falls and output rises.
d. productivity and output fall.
Frictional unemployment results from
a. job searching. It is often thought to explain relatively short spells of unemployment.
b. job searching. It is often thought to explain relatively long spells of unemployment
c. a surplus in the some labor markets. It is often thought to explain relatively short
spells of unemployment.
d. a surplus in some labor markets. It is often thought to explain relatively long spells of
unemployment.
A U.S. grocery chain purchases olive oil from Tunisia and sells it to U.S. consumers. In
which of the following is this transaction included?
a. U.S. consumption and U.S. imports
b. U.S. consumption but not U.S. imports
c. U.S. imports but not U.S. consumption
d. neither U.S. consumption nor U.S. imports
Suppose households attempt to decrease their money holdings. To counter this decrease
in money demand and stabilize output, the Federal Reserve will
a. increase government spending.
b. increase the money supply.
c. decrease government spending.
d. decrease the money supply.
What would happen to the equilibrium price and quantity of coffee if the wages of
coffee-bean pickers fell and the price of tea fell?
a. Price would fall, and the effect on quantity would be ambiguous.
b. Price would rise, and the effect on quantity would be ambiguous.
c. Quantity would fall, and the effect on price would be ambiguous.
d. Quantity would rise, and the effect on price would be ambiguous.
A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of
a. a U.S. import and a Mexican export
b. a U.S. export and a Mexican import
c. an export for both the U.S. and Mexico
d. an import for both Mexico and the U.S.
Table 3-24
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
RefertoTable3-24.England has a comparative advantage in the production of
a. cheese and Spain has a comparative advantage in the production of bread.
b. bread and Spain has a comparative advantage in the production of cheese.
c. both goods and Spain has a comparative advantage in the production of neither good.
d. neither good and Spain has a comparative advantage in the production of both goods.
Economic models
a. are not useful because they omit many real-world details.
b. are usually composed of diagrams and equations.
c. are useful because they do not omit any real-world details.
d. are usually plastic representations of the economy.
In the open-economy macroeconomic model, other things the same, which of the
following both make the exchange rate fall?
a. U.S. investment demand falls and foreign demand for U.S. goods falls
b. U.S. investment demand falls and foreign demand for U.S. goods rises
c. U.S. investment demand rises and foreign demand for U.S. goods falls
d. U.S. investment demand rises and foreign demand for U.S. goods rises
Suppose there are a large number of men who used to work or seek work who now no
longer do either. Other things the same, this makes
a. the number of people unemployed rise but does not change the labor force.
b. the number of people unemployed rise but makes the labor force fall.
c. both the number of people unemployed and the labor force fall.
d. the number of people unemployed fall but does not change the labor force.
In practice, the problems created by time inconsistency and the political business cycle
appear to be quite serious.
a. True
b. False
Net capital outflow is defined as the purchase of
a. foreign assets by domestic residents minus the purchase of domestic assets by foreign
residents.
b. foreign assets by domestic residents minus the purchase of foreign goods and
services by domestic residents.
c. domestic assets by foreign residents minus the purchase of domestic goods and
services by foreign residents.
d. domestic assets by foreign residents minus the purchase of foreign assets by domestic
residents.
Figure34-4.On the figure, MSrepresents money supply and MDrepresents money
demand.
RefertoFigure34-4. Which of the following events could explain a shift of the
money-demand curve from MD1 to MD2?
a. a decrease in the price level
b. a decrease in the cost of borrowing
c. an increase in the price level
d. an increase in the cost of borrowing
In the actual economy, goods and services are purchased by
a. households, but not firms or the government.
b. households and firms, but not the government.
c. households and the government, but not firms.
d. households, firms, and the government.
John is a stockbroker. He has had several job offers, but he has turned them down
because he thinks he can find a firm that better matches his tastes and skills. Curtis has
looked for work as an accountant for some time. While the demand for accountants
does not appear to be falling, there seems to be more people applying than jobs
available.
a. John and Curtis are both frictionally unemployed.
b. John and Curtis are both structurally unemployed.
c. John is frictionally unemployed, and Curtis is structurally unemployed.
d. John is structurally unemployed, and Curtis is frictionally unemployed.
Table29-3.An economy starts with $50,000 in currency. All of this currency is
deposited into a single bank, and the bank then makes loans totaling $45,750. The
T-account of the bank is shown below.
RefetoTable29-3.The bank’s reserve ratio is
a. 17.5 percent.
b. 8.5 percent.
c. 91.5 percent.
d. 100 percent.
According to liquidity preference theory, an increase in the price level causes the
interest rate to
a. increase, which increases the quantity of goods and services demanded.
b. increase, which decreases the quantity of goods and services demanded.
c. decrease, which increases the quantity of goods and services demanded.
d. decrease, which decreases the quantity of goods and services demanded.
Which of the following transactions adds to U.S. GDP for 2015?
a. In 2015, Frank’s Feta manufactures 2000 pounds of cheese that will eventually be
sold to grocery stores.
The 2000 pounds of cheese remains in Frank’s inventory at the end of 2015.
b. An Irish marketing consultant works in Richmond during the summer of 2015 and
earns $45,000 during that time.
c. When Len and Mika were both single, they lived in separate apartments and each
paid $700 in rent. Len and Mika got married in 2015 and they bought a previously
unoccupied house that, according to reliable estimates, could be rented for $1,500 per
month.
d. All of the above transactions add to U.S. GDP for 2015.
In the economy of Talikastan in 2015, consumption was $3000, exports were $1200,
GDP was $8000, government purchases were $1200, and imports were $600. What was
Talikastan’s investment in 2015?
a. $3200
b. $5600
c. $2000
d. $4400
The relatively low inflation experienced in the United States in the 1990s is attributable
to
a. slow growth of U.S. productivity during the 1990s.
b. slow growth of the quantity of money in the U.S. in the 1990s.
c. low levels of government spending in the U.S. in the 1980s and 1990s.
d. the eight-year presidency of William Jefferson Clinton during the 1990s.