When the market price is above the equilibrium price, the quantity of the good
demanded exceeds the quantity supplied.
a. True
b. False
Real Foods produced 400,000 cans of diced tomatoes last year and 460,000 cans of
diced tomatoes this year. It employed the same number of labor hours each year. Real
Foods’ productivity
a. decreased 13%.
b. was unchanged.
c. increased 13%.
d. increased 15%.
Which of the following is correct?
a. Economic fluctuations are easily predicted by competent economists.
b. Recessions have never occurred very close together.
c. Spending, income, and production do not fluctuate closely with real GDP.
d. None of the above is correct.
In a system of 100-percent-reserve banking, the purpose of a bank is to
a. make loans to households.
b. influence the money supply.
c. give depositors a safe place to keep their money.
d. buy and sell gold.
Suppose aggregate demand fell. In order to stabilize the economy, the government
might
a. decrease the money supply.
b. decrease government expenditures.
c. decrease taxes.
d. do nothing.
Which of the following is included in the demand for loanable funds?
a. investment and government borrowing
b. investment but not government borrowing
c. government borrowing but not investment
d. neither government borrowing nor investment
If the central bank in some country raised the reserve requirement, then the money
multiplier for that country
a. would increase.
b. would not change.
c. would decrease.
d. could do any of the above.
A 2009 article in TheEconomistnoted that some studies have provided evidence
indicating that multipliers are
a. smaller in closed economies than in open economies.
b. larger in closed economies than in open economies.
c. smaller in capitalist economies than in socialist economies.
d. larger in capitalist economies than in socialist economies.
Efficiency wages create a labor
a. surplus and so increase unemployment.
b. surplus and so decrease unemployment.
c. shortage and so increase unemployment.
d. shortage and so decrease unemployment.
In June 2009 the Bureau of Labor Statistics reported an adult population of 234.9
million, a labor force of 154 million and employment of 141.6 million. Based on these
numbers the unemployment rate was
a. 93.3/234.9.
b. 12.4/234.9.
c. 93.3/154.
d. 12.4/154.
Which of the following would not be included in aggregate demand?
a. an increase in firms’ inventories.
b. purchases of goods by households.
c. firms’ purchases of newly produced machinery.
d. government’s tax collections.
The theory of liquidity preference assumes that the nominal supply of money is
determined by the
a. level of real output only.
b. interest rate only.
c. level of real output and by the interest rate.
d. Federal Reserve.
Imposing an import quota causes the domestic real exchange rate to
a. appreciate, which increases foreign demand for domestic goods.
b. appreciate, which decreases foreign demand for domestic goods.
c. depreciate, which increases foreign demand for domestic goods.
d. depreciate, which decreases foreign demand for domestic goods.
The production possibilities frontier is a graph that shows the various combinations of
output that an economy
a. should produce.
b. wants to produce.
c. can produce.
d. demands.
Suppose that there are diminishing returns to capital. Suppose also that two countries
are the same except one has more capital per worker and so it has more real GDP per
worker than the other. Finally, suppose that the saving rate in both countries increases
from 4 percent to 7 percent. Over the next ten years we would expect that
a. the growth rate will not change in either country.
b. the country that started with less capital per worker will grow faster.
c. the country that started with more capital per worker will grow faster.
d. both countries will grow and at the same higher rate.
A decrease in the price of sugar will shift the supply curve for cookies to the right.
a. True
b. False
In 1972, one could buy model rocket engines for $1.50 each. If those same engines cost
$2.50 each today, then which pair of CPIs would make the engine prices in today’s
dollars the same for both years?
a. 60 in 1972 and 95 today
b. 60 in 1972 and 120 today
c. 90 in 1972 and 150 today
d. 96 in 1972 and 154 today
A bank’s reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves
amount to
a. $8.
b. $80.
c. $92.
d. $920.
During the Great Depression in the early 1930s,
a. bank runs closed many banks.
b. the money supply rose sharply.
c. the Fed decreased reserve requirements.
d. both a and b are correct.
Unions are exempt from U.S. antitrust laws.
a. True
b. False
Economists often find it worthwhile to make assumptions that do not necessarily
describe the real world.
a. True
b. False
Which of the following is notcorrect?
a. A potential cost of deficits is that they reduce national saving, thereby reducing
growth of the capital stock and output growth.
b. Deficits give people the opportunity to consume at the expense of their children, but
they do not require them to do so.
c. The U.S. debt per-person is large compared with average lifetime income.
d. Current spending may benefit future generations.
In the 1970s, the U.S. inflation rate reached about
a. 7 percent per year.
b. 10 percent per year.
c. 14 percent per year.
d. 20 percent per year.
Table 23-5
The country of Caspir produces only cereal and milk. Quantities and prices of these
goods for the last several years are shown below. The base year is 2015.
Prices and Quantities
RefertoTable23-5.This country’s inflation rate from 2017 to 2018 was
a. 20.0%.
b. 21.8%.
c. 38.9%.
d. 28.0%.
Which of the following is both a financial institution and a financial intermediary?
a. banks
b. stock exchanges
c. the bond market
d. All of the above are correct.
A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other
things the same, U.S. net exports
a. increase, and U.S. net capital outflow increases.
b. increase, and U.S. net capital outflow decreases.
c. decrease, and U.S. net capital outflow increases.
d. decrease, and U.S. net capital outflow decreases.
In the open-economy macroeconomic model, the supply of dollars in the market for
foreign-currency exchange comes from
a. net exports
b. net capital outflow
c. net exports + net capital outflow
d. net exports – net capital outflow
Fundamental analysis determines the value of a stock based on
a. dividends.
b. the expected final sale price.
c. the ability of the corporation to earn profits.
d. All of the above are correct.
Which of the following are financial intermediaries?
a. both banks and mutual funds
b. banks but not mutual funds
c. mutual funds but not banks
d. neither banks or mutual funds
Table 3-26
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Refer to Table3-26. Suppose Korea decides to increase its production of cars by 18.
What is the opportunity cost of this decision?
a. 3 airplanes
b. 6 airplanes
c. 16 airplanes
d. 150 airplanes
Which of the following is considered human capital? Knowledge acquired from
a. early childhood education programs
b. job training
c. on-the-job experience
d. All of the above are correct.
The phrase “no such thing as a free lunch” means
a. people must face tradeoffs.
b. rational people think at the margin.
c. people respond to incentives.
d. trade can make everyone better off.
A. W. Phillips’ findings were based on data
a. from 1861-1957 for the United Kingdom.
b. from 1861-1957 for the United States.
c. mostly from the post-World War II period in the United Kingdom.
d. mostly from the post-World War II period in the United States.
Figure 28-3
RefetoFigure28-3.If the government imposes a minimum wage of $4, how many
workers will be unemployed?
a. 0
b. 3,000
c. 4,000
d. 7,000
A is a certificate of indebtedness and a is a claim to partial ownership in a firm.
Suppose that in a country the total holdings of banks were as follows: required reserves
= $45 million excess reserves = $15 million deposits = $750 million loans = $600
million
Treasury bonds = $90 million. Show that the balance sheet balances if these are the only
assets and liabilities. Assuming that people hold no currency, what happens to each of
these values if the central bank changes the reserve requirement ratio to 2%, banks still
want to hold the same percentage of excess reserves, and banks don”t change their
holdings of Treasury bonds? How much does the money supply change by?
are changes in fiscal policy that stimulate aggregate demand when the economy goes
into recession without policymakers having to take any deliberate action.
Suppose the interest rate is 5 percent. Consider three payment options:
1) $500 today.
2) $520 one year from today.
3) $550 two years from today.
Which of the following is correct?
a. 1 has the lowest present value and 3 has the highest.
b. 2 has the lowest present value and 1 has the highest.
c. 3 has the lowest present value and 2 has the highest.
d. None of the above is correct.
What variables besides real GDP tend to decline during recessions? Given the definition
of real GDP, argue that declines in these variables are to be expected.
Debbie quits her job, which pays $30,000 a year, to finish her college degree. Her
annual college expenses are $10,000 for tuition, $2,000 for books, and $700 for food.
What is her opportunity cost of attending college for the year?
The exchange-rate effect helps explain what feature in the aggregate demand and
aggregate supply model?
Scenario 24-5
Suppose the residents of Mediaville spend all of their income on books, CDs, and
DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for
$900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for
$1,250. Assume that the market basket for the CPI is defined in the base year.
RefertoScenario24-5.What are the prices of books, CDs, and DVDs in 2010?
If a country’s exchange rate rises, what happens to its exports and what happens to its
imports?
Suppose that Bill, a resident of the U.S., buys software from a company in Japan.
Explain why and in what directions this changes U.S. net exports and U.S. net capital
outflow.
In 2011 the U.S. began with a trade deficit. During the year exports rose by more than
imports. What should have happened to the U.S. trade deficit?
Table 4-15
The following table shows the number of cases of water each seller is willing to sell at
the prices listed.
RefertoTable4-15.If all four suppliers operate in this market, what is the market
quantity supplied when the price is $6.00 per case?
Explain the logic according to liquidity preference theory by which an increase in the
money supply changes the aggregate demand curve.
If the real interest rate is 10.3% and the nominal interest rate is 12.6%, what is the
inflation rate?
Other things the same, what happens in the short run to the price level and quantity of
output when the aggregate demand curve shifts to the left?
A higher return on saving the amount a household needs to save to achieve any target
level of future consumption. This effect on saving is called the effect. If the income
effect is large enough, then a reduction in taxes on saving mighttax revenues.
The sticky-price theory helps explain what feature of the aggregate demand and
aggregate supply model?
Monetary policy has an important influence onandin the short run.
Figure 2-14
Consider the production possibilities curve for a country that can produce sweaters,
apples (in bushels), or a combination of the two.
Refer to Figure2-14. The bowed outward shape of the production possibilities curve
indicates that opportunity cost of apples in terms of sweaters is
Alexandria, a British citizen, owns and manages a fish and chips shop in Washington,
D.C.
She buys fresh food produced by U.S. workers, pays utilities to a U.S. company, and
employs only U.S. citizens. What part, if any, of the restaurant’s production is included
in U.S. GDP? What part, if any, of the restaurant’s production is included in U.S. GNP?