U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are
consistent with the level of net exports?
a. The U.S has a trade surplus. The U.S. purchases $800 billion worth of foreign assets
and foreign countries purchase $600 billion worth of U.S. assets.
b. The U.S. has a trade surplus. The U.S. purchases $600 billion worth of foreign assets
and foreign countries purchase $800 billion worth of U.S. assets.
c. The U.S has a trade deficit. The U.S. purchases $800 billion worth of foreign assets
and foreign countries purchase $600 billion worth of U.S. assets.
d. The U.S. has a trade deficit. The U.S. purchases $600 billion worth of foreign assets
and foreign countries purchase $800 billion worth of U.S. asset.
PZX Corporation has the opportunity to undertake an investment project that will cost
$10,000 today and yield the company $13,310 in 3 years. PZX will forgo the project if
the interest rate is higher than 10 percent.
a. True
b. False
Which of the following correctly ranks the three countries, from highest to lowest, for
percentage of high-school age children in school?
a. United Kingdom, Mali, Mexico.
b. Mexico, Mali, United Kingdom.
c. United Kingdom, Mexico, Mali.
d. Mali, Mexico, United Kingdom.
Which of the following is correct concerning the long-run Phillips curve?
a. Its position is determined primarily by monetary factors.
b. If it shifts right, long-run aggregate supply shifts right.
c. It cannot be changed by any government policy.
d. Its position depends on the natural rate of unemployment.
From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the
inflation rate for medical care?
a. 5.7 percent
b. 6.0 percent
c. 9.0 percent
d. 59.0 percent
The basket of goods in the consumer price index changes
a. occasionally, as does the group of goods used to compute the GDP deflator.
b. automatically, as does the group of goods used to compute the GDP deflator.
c. occasionally, whereas the group of goods used to compute the GDP deflator changes
automatically.
d. automatically, whereas the group of goods used to compute the GDP deflator changes
occasionally.
Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from
drinking the third soda
a. can be thought of as the total benefit Bridget enjoys by drinking three sodas minus
the total benefit she would have enjoyed by drinking just two sodas.
b. determines Bridget’s willingness to pay for the third soda.
c. is likely different from the marginal benefit provided to Bridget by the second soda.
d. All of the above are correct.
In the United States in the early 1980s, there was a government budget
a. surplus and a trade surplus.
b. deficit and a trade deficit.
c. surplus and a trade deficit.
d. deficit and a trade surplus.
RefertoFigure2-9,Panel(a).To gain 2 donuts by moving from point L to point M,
society must sacrifice
a. efficiency.
b. employment.
c. 4 cups of coffee.
d. More than one of the above is correct.
A given short-run Phillips curve shows that an increase in the inflation rate will be
accompanied by a lower unemployment rate in the short run.
a. True
b. False
Government purchases are said to have a
a. multiplier effect on aggregate supply.
b. multiplier effect on aggregate demand.
c. liquidity-enhancing effect on aggregate supply.
d. liquidity-enhancing effect on aggregate demand.
The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in
the United States costs $40, how many florins must a basket of goods in Aruba cost for
purchasing-power parity to hold?
a. 20 florin
b. 40 florin
c. 60 florin
d. 80 florin
Other things the same, an increase in the interest rate
a. would shift the demand for loanable funds to the right.
b. would shift the demand for loanable funds to the left.
c. would increase the quantity of loanable funds demanded.
d. would decrease the quantity of loanable funds demanded.
During recessions investment
a. falls by a larger percentage than GDP.
b. falls by about the same percentage as GDP.
c. falls by a smaller percentage than GDP.
d. falls but the percentage change is sometimes much larger and sometimes much
smaller.
Sellers as a group determine the demand for a product, and buyers as a group determine
the supply of a product.
a. True
b. False
Assume there is a multiplier effect, some crowding out, and no accelerator effect. An
increase in government expenditures changes aggregate demand more,
a. the smaller the MPCand the stronger the influence of income on money demand.
b. the smaller the MPCand the weaker the influence of income on money demand.
c. the larger the MPCand the stronger the influence of income on money demand.
d. the larger the MPCand the weaker the influence of income on money demand.
When Haley states that inflation by itself always reduces the real return on her saving,
she
a. has expressed the idea of the inflation tax.
b. has expressed the idea behind menu costs.
c. has committed the inflation fallacy.
d. has expressed the idea behind shoeleather costs.
Over the past century in the United States, real GDP per person has grown, on average,
by about
a. 1 percent per year.
b. 2 percent per year.
c. 3 percent per year.
d. 5 percent per year.
If aggregate demand shifts because of a wave of pessimism about stock prices, those
who favor a policy that “leans against the wind” would advocate the
a. Federal Reserve increase the money supply or the government increase taxes.
b. Federal Reserve increase the money supply or the government decrease taxes.
c. Federal Reserve decrease the money supply or the government increase taxes.
d. Federal Reserve decrease the money supply or the government decrease taxes.
The production possibilities frontier illustrates
a. the combinations of output that an economy should produce.
b. the combinations of output that an economy should consume.
c. the combinations of output that an economy can produce.
d. All of the above are correct.
Which of the following shifts aggregate demand to the right?
a. The price level rises.
b. The price level falls.
c. The Fed purchases government bonds on the open market.
d. None of the above is correct.
Friedman and Phelps argued that
a. if peoples’ inflation expectations were fixed, then an increase in the money supply
growth rate could not change output in the short or long run.
b. if peoples’ inflation expectations were fixed, then a decrease in the money supply
growth rate could raise output and unemployment in the short run.
c. any change in unemployment created by making aggregate demand increase more
rapidly is temporary because people eventually revise their inflation expectations.
d. None of the above is correct.
Typical estimates of the sacrifice ratio suggest that about 10 percent of annual output
has to be given up in order to reduce the inflation rate from
a. 8 percent to 4 percent.
b. 8 percent to 5 percent.
c. 7 percent to 5 percent.
d. 7 percent to 6 percent.
Which part of real GDP fluctuates most over the course of the business cycle?
a. consumption expenditures
b. government expenditures
c. investment expenditures
d. net exports
Suppose that college professors at public universities are unionized. If public university
college professors change their minds and vote not to be unionized, the quantity of
public university college professors demanded will
a. rise. The supply of workers in other similar professions will also rise.
b. rise. The supply of workers in other similar professions will fall.
c. fall. The supply of workers in other similar professions will rise.
d. fall. The supply of workers in other similar professions will also fall.
Suppose that businesses and consumers become much more optimistic about the future
of the economy. To stabilize output, the Federal Reserve could
a. buy bonds to raise interest rates.
b. buy bonds to lower interest rates.
c. sell bonds to raise interest rates.
d. sell bonds to lower interest rates.
In the U.S. a digital camera costs $200. The same camera in London sells for 90
pounds. If the exchange rate were .50 pounds per dollar, then which of the following
would be correct?
a. The real exchange rate is greater than 1. A person in London with $200 could
exchange them for pounds and have more than enough to buy the camera there.
b. The real exchange rate is greater than 1. A person in London with $200 could
exchange them for pounds but then wouldn”t have enough to buy the camera there.
c. The real exchange rate is less than 1. A person in London with $200 could exchange
them for pounds and have more than enough to buy the camera there.
d. The real exchange rate is less than 1. A person in London with $200 could exchange
them for pounds but then wouldn”t have enough to buy the camera.
An increase in the budget deficit causes domestic interest rates
a. and net capital outflow to rise.
b. to rise and net capital outflow to fall.
c. to fall and net capital outflow to rise.
d. and net capital outflow to fall.
Which of the following is correct?
a. Labor force = number of employed.
b. Labor force = population – number of unemployed.
c. Unemployment Rate = number of unemployed (number of employed + number of
unemployed) 100.
d. Unemployment Rate = number of unemployed adult population 100.
The government buys new weapons systems. The manufacturers of weapons pay their
employees. The employees spend this money on goods and services. The firms from
which the employees buy the goods and services pay their employees. This sequence of
events illustrates
a. the accelerator effect.
b. the multiplier effect.
c. the chain effect.
d. the bandwagon effect.
Who gets scarce resources in a market economy?
a. the government
b. whoever the government decides gets them
c. whoever wants them
d. whoever is willing and able to pay the price
Suppose a basket of goods and services has been selected to calculate the CPI and 2012
has been selected as the base year. In 2012, the basket’s cost was $50; in 2014, the
basket’s cost was $52; and in 2016, the basket’s cost was $55. The value of the CPI in
2016 was
a. 90.9.
b. 104.0.
c. 105.0.
d. 110.0.
Which of the following reduce the incentive for households to save?
a. both means-testing of government benefits and inheritance taxes
b. means-testing of government benefits but not inheritance taxes
c. inheritance taxes, but not means-testing of government benefits
d. neither means-testing of government benefits nor inheritance taxes
If the interest rate is below the Fed’s target, the Fed would
a. buy bonds to increase the money supply.
b. buy bonds to decrease the money supply.
c. sell bonds to increase the money supply.
d. sell bonds to decrease the money supply.