When a union bargains successfully with employers, in that industry,
a. both wages and unemployment increase.
b. wages increase and unemployment decreases.
c. wages decrease and unemployment increases.
d. both wages and unemployment decrease.
People who are risk averse dislike bad outcomes more than they like comparable good
outcomes.
a. True
b. False
Adam Smith’s book TheWealthofNationswas published in
a. 1692.
b. 1776.
c. 1816.
d. 1936.
The economy is in long-run equilibrium when Senator Soldout argues that the Fed
should do more to fight unemployment. He argues that if the Fed increased the money
supply faster, more workers would find jobs. The Senator’s argument
a. is completely correct.
b. is completely wrong.
c. is true for the short run but not the long run.
d. is true for the long run but not the short run
.
If sellers expect higher basket prices in the near future, the current
a. supply of baskets will increase.
b. supply of baskets will decrease.
c. supply of baskets will be unaffected.
d. demand for baskets will decrease.
Which of the following statements is true?
a. Even if we know the values of the consumer price index for the years 2009 and 2010,
we cannot calculate the inflation rate for 2010 if we do not know which year is the base
year.
b. If we know the base year is 1990, and if we know the value of the consumer price
index for the year 2010, then we have all the information we need to calculate the
inflation rate for 2010.
c. If we know the base year is 2000, and if we know the value of the consumer price
index for the year 1995, then we have all the information we need to calculate the
inflation rate for 1995.
d. If we know the base year is 2000, and if we know the value of the consumer price
index for the year 1995, then we have all the information we need to calculate the
percentage change in the cost of living between 1995 and 2000.
Which of the following topics are more likely to be studied by a macroeconomist than
by a microeconomist?
a. the effect of taxes on the prices of airline tickets, and the profitability of
automobile-manufacturing firms
b. the price of beef, and wage differences between genders
c. how consumers maximize utility, and how prices are established in markets for
agricultural products
d. the percentage of the labor force that is out of work, and differences in average
income from country to country
In equilibrium a country has a net capital outflow of $200 billion and domestic
investment of $150 billion. What is the quantity of loanable funds demanded?
a. $50 billion
b. $150 billion
c. $200 billion
d. $350 billion
The Fed can influence unemployment in
a. the short run and in the long run.
b. the short run, but not in the long run.
c. the long run, but not in the short run.
d. neither the short nor the long run.
Mia puts money into a piggy bank so she can spend it later. What function of money
does this illustrate?
a. store of value
b. medium of exchange
c. unit of account
d. None of the above is correct.
Which of the following statements is correct?
a. NASDAQ is an important stock exchange in the United States.
b. The Standard & Poor’s 500 Index and the New York Stock Exchange are two
examples of stock indexes.
c. The most significant influence on the demand for a corporation’s stock is the number
of shares of the stock that the corporation has issued.
d. All of the above are correct.
Initially, the economy is in long-run equilibrium. The aggregate demand curve then
shifts $80 billion to the left. The government wants to change spending to offset this
decrease in demand. The MPCis 0.75. Suppose the effect on aggregate demand of a tax
change is 3/4 as strong as the effect of a change in government expenditure. There is no
crowding out and no accelerator effect. What should the government do if it wants to
offset the decrease in real GDP?
a. Raise both taxes and expenditures by $80 billion dollars.
b. Raise both taxes and expenditures by $10 billion dollars.
c. Reduce both taxes and expenditures by $80 billion dollars.
d. Reduce both taxes and expenditures by $10 billion dollars.
Upland has a population of 15,000, of whom 9,000 work 8 hours a day to produce real
output of $342,000. Lowland has a population of 8,000, of whom 7,000 work 7 hours a
day to produce real output of $171,500.
a. Upland has higher productivity and higher real GDP per person than Lowland.
b. Upland has higher productivity but lower real GDP per person than Lowland.
c. Upland has lower productivity but higher real GDP per person than Lowland.
d. Upland has lower productivity and lower real GDP per person than Lowland.
Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP
was due to a(n)
a. decrease in U.S. investment.
b. decrease in U.S. national saving.
c. increase in U.S. investment.
d. increase in U.S. national saving.
The discovery of a large amount of previously-undiscovered oil in the U.S. would shift
a. the long-run aggregate-supply curve to the right.
b. the long-run aggregate-supply curve to the left.
c. the aggregate-demand curve to the left.
d. None of the above is correct.
If a reduction in taxes on savings reduced the amount of private saving, then the
a. income effect equaled the substitution effect.
b. income effect outweighed the substitution effect.
c. the substitution effect outweighed the income effect.
d. None of the above.
Which of the following events could explain a decrease in interest rates together with
an increase in investment?
a. The government went from surplus to deficit.
b. The government instituted an investment tax credit.
c. The government reduced the tax rate on savings.
d. None of the above is correct.
Figure 2-7
RefertoFigure2-7. Inefficient production is represented by which point(s)?
a. L, M
b. N, O, P, Q
c. N, O, P
d. Q
Retained earnings is income that
a. households retain after paying taxes.
b. businesses retain after paying taxes.
c. corporations have earned but have not used to invest in plant, equipment, and
inventories.
d. corporations have earned but have not paid out to their owners.
What happens to each of the following if investment becomes more desirable at each
interest rate?
a. the interest rate
b. net capital outflow
c. the exchange rate
If the risk of buying U.S. assets rises because it is discovered that lending institutions
had not carefully evaluated borrowers prior to lending them funds, then
a. net capital outflow and the real exchange rate will rise.
b. net capital outflow will rise and the real exchange rate will fall.
c. net capital outflow will fall and the real exchange rate will rise.
d. net capital outflow and the exchange rate will fall.
By far the largest category of goods and services in the CPI basket is
a. housing.
b. transportation.
c. education & communication.
d. food & beverages.
The inflation rate is calculated
a. by determining the change in the price index from the preceding period.
b. by determining the change in the price index from the base year.
c. by determining the percentage change in the price index from the preceding period.
d. by determining the percentage change in the price index from the base year.
GDP is adjusted to reflect changes in the quality of the environment such as changes in
air and water quality.
a. True
b. False
Figure 34-1
RefertoFigure34-1. There is an excess demand for money at an interest rate of
a. 2 percent.
b. 3 percent.
c. 4 percent.
d. None of the above is correct.
Which of the following is nota widely acknowledged problem with using the CPI as a
measure of the cost of living?
a. substitution bias
b. introduction of new goods
c. unmeasured quality change
d. unmeasured price change
Figure 2-2
Refer to Figure2-2. If the flow of goods and services is part of what is represented by
the inner loop of this circular-flow diagram, then
a. the flow of factors of production is also part of what is represented by the inner loop.
b. the flow of income paid to households is also part of what is represented by the inner
loop.
c. the flow of revenue to firms is also part of what is represented by the inner loop.
d. households must be sellers of output.
The lag problem associated with fiscal policy is due mostly to
a. the fact that business firms make investment plans far in advance.
b. the political system of checks and balances that slows down the process of
implementing fiscal policy.
c. the time it takes for changes in government spending or taxes to affect the interest
rate.
d. All of the above are correct.
One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines
ordering new, fuel-efficient aircraft.
a. True
b. False
Microeconomics and macroeconomics are closely linked.
a. True
b. False
Table 3-11
Assume that Max and Min can switch between producing mittens and producing hats at
a constant rate.
RefertoTable3-11. Which of the following points would notbe on Max’s production
possibilities frontier, based on a 36-hour production period?
a. (18 mittens, 0 hats)
b. (12 mittens, 2 hats)
c. (6 mittens, 4 hats)
d. (2 mittens, 6 hats)
Suppose over the last year that the price of iron ore increased from $1,200 a ton to
$1,275 a ton. Over the same time a measure of the overall price level increased from
150 to 156. The price of iron ore increased by
a. less than inflation, so it became less scarce.
b. less than inflation, so it became more scarce.
c. more than inflation, so it became more scarce.
d. more than inflation, so it became less scarce.