What is the value of a newly issued 3-year bond with a face value of $5,000 and no
coupon payments? Assume the interest rate is 8 percent (0.08) per year.
If the Fed wishes to maintain its interest rate target in the face of decreased money
demand it would likely
a. increase the money supply.
b. decrease the money supply.
c. more stringently enforce already existing banking regulations.
d. propose new banking regulations.
e. become more lax when it enforces already existing banking regulations.
Which of the following would not be considered a consumer durable?
a. A sofa
b. A personal computer
c. Dinner each month at a nice restaurant
d. An automobile
e. A refrigerator
The first paper currency issued by the U.S. government was known as the
a. Federal Reserve note
b. treasury bill
c. greenback
d. pound
e. gold certificate
Which of the following events triggered intense debate over the classical model of the
economy?
a. The U.S. Civil War
b. World War I
c. the Baby Boom
d. The Great Depression
e. World War II
There are two kinds of changes in net taxes: First, net taxes can change if the
government changes its tax or transfer policies. Second, net taxes change automatically
as income rises and falls, without any change in policy. The _________ kind of change
sets off the multiplier process, while the _________ kind of change occurs during the
multiplier process.
a. first; first.
b. first; second.
c. second; first.
d. second; second.
e. None of the above.
If significant economies of scale continue as output increases,
Fixed inputs are those whose
The relationship between household saving and business investment spending in
equilibrium is:
Planned investment = household saving – government spending + taxes
If the income elasticity of demand is negative, this means that the good is
Suppose that production of the product in Figure 14-2 imposes a cost on society of
$7.00 per unit. If the government imposes a tax of $7.00 per unit of output on the
producer the equilibrium price will
When a payment is indexed to inflation and the price index understates inflation,
a. the real payment decreases over time
b. the real payment increases over time
c. the nominal payment decreases over time
d. in unemployment rate will increase
e. the level of unemployment will increase
Which of the following statements correctly describes international trade in accordance
with comparative advantage?
a. Trade is impossible unless there exists a purely competitive market for foreign
exchange.
b. Trade makes all the citizens of the trading countries better off, which is a clear
example of a Pareto improvement.
c. Trade may well make some citizens in each trading country worse off.
d. Trade requires the judicious application by government of tariffs and quotas in order
to discourage production according to comparative disadvantage.
e. Trade requires that the economies of the trading partners be of roughly equal size
(United States versus Andorra just does not work).
The long-run aggregate supply curve
a. is vertical
b. is upward sloping
c. is downward sloping
d. is horizontal
e. can have a variety of shapes depending on fiscal policy
Which of the following would be included in a year’s GDP?
a. Susan cleans the fuel injectors on her car.
b. A private individual purchases 100 shares of IBM stock.
c. A timber company purchases land in Oregon.
d. A man buys an antique desk from his neighbor.
e. A college professor purchases a new computer.
In the long run, exchange rates
a. are determined by business cycle fluctuations
b. are determined by movements of hot money
c. will adjust until the price of a bundle of goods is the same in both countries
d. will reflect economic fluctuations in both countries
e. are still a mystery to most economists
If the dollar-per-pound exchange rate decreases,
a. British goods become more expensive to the British.
b. British goods become more expensive to Americans.
c. British goods become less expensive to Americans.
d. British goods become less expensive to Europeans.
e. none of the above.
Consider Figure 14-7 above. Which of the following would cause a movement from
point A to point B on the diagram?
a. An increase in the price level.
b. A decrease in the interest rate.
c. An increase in the interest rate.
d. An increase in real income.
e. A decrease in the price level.
When GDP is rising, the economy is experiencing
a. a contraction
b. a recession
c. a financial crisis
d. an expansion
e. equilibrium
Tax shifting