If the Fed has a goal of stable real GDP and government spending increased, which of
the following would occur?
a. The money demand would not change, real GDP would not change, the interest rate
would decrease, and there would be partial crowding out.
b. Money demand would not change, real GDP would not change, the interest rate
would increase, and there would be complete crowding out.
c. Money demand would increase, real GDP would not change, the interest rate would
increase, and there would be partial crowding out.
d. Money demand would not change, real GDP would increase, the interest rate would
decrease, and there would be complete crowding out.
e. Money demand would increase, real GDP would not change, the interest rate would
decrease, and there would be complete crowding out.
Rent control is an example of a price ceiling. Which of the following problems must be
addressed under a rent control program?
a. what to do with the surplus of rental units
b. how to subsidize renters so that they can afford to pay the higher rents
c. how to decrease the quantity of rental units to the equilibrium level
d. whether the opportunity cost of rental units equals the competitive market price
e. how to allocate scarce rental units
In the classical model, fiscal policy is both ineffective and unnecessary.
John Maynard Keynes and his followers argued that
a. the classical model does a good job of explaining the economy’s operation in both the
short run and long run
b. the short run is unimportant so economists should focus their attention on the long
run
c. the economy should be allowed to function with minimal government interference
d. the economy operates the same way in both the short run and long run
e. while the classical model might explain economic performance in the long run, the
long run could take a long time to reach
A decrease in demand coupled with a decrease in supply results in a(n)
a. increase in equilibrium price and a decrease in equilibrium quantity
b. decrease in equilibrium price and a decrease in equilibrium quantity
c. increase in equilibrium price and a increase in equilibrium quantity
d. ambiguous effect of equilibrium price and a decrease in equilibrium quantity
e. ambiguous effect on equilibrium price and a increase in equilibrium quantity
The labor demand curve shows the
a. number of workers that firms will want to hire at any wage rate
b. number of people who will want jobs at any wage rate
c. amount of labor that a firm needs to produce a given amount of output
d. equilibrium wage rate and number of workers employed
e. amount of output workers will be able to buy for a given number of hours worked
What is the equilibrium condition in the loanable funds market?
a. S + G = IP – T
b. S = IP + T – G
c. S + IP = G – T
d. S – T = IP + G
e. S = IP + G – T
A speculator is someone who
a. buys a good for immediate consumption
b. buys a good for a low price, hoping to sell it in the future for a higher price
c. buys a good for one price and hopes to sell it for a lower price in the future
d. sells a good for a lower price than its original purchase price
e. sells all of his or her merchandise and then exits the market
Substitution bias
a. is one factor that causes the Consumer Price Index to underestimate the inflation rate
b. is caused by the poor quality of many products
c. is one of the primary causes of inflation
d. involves consumer behavior that helps explain why the Consumer Price Index
overestimates the inflation rate
e. suggests most economists substitute other price indices for the flawed Consumer
Price Index
Use the table below to find the marginal propensity to consume.
a. 0.50
b. 0.60
c. 0.65
d. 0.75
e. 0.80
Suppose a new freshman enters State U with the objective of having lots of fun while
getting good grades. Suppose that Friday and Saturday night offer the best/most
efficient times for having fun and the day time offers the best time for studying. She
should
a. study every single waking hour.
b. party every single waking hour.
c. assume there is no tradeoff between fun and grades.
d. assume there is a constant tradeoff between fun and grades.
e. assume there is a tradeoff between fun and grades that reflects increasing opportunity
cost.
If Pat can produce a good or service at a lower opportunity cost than Chris can, then
a. Pat has a comparative advantage in producing the good or service
b. no gains are possible through specialization
c. Pat must have an absolute advantage in producing the good or service
d. Pat must be more talented than Chris
e. society is at a point along its production possibilities frontier
Figure 4-3 shows the supply and demand for socks. If a price floor of $6 is imposed,
the quantity of socks actually purchased will be
a. 10 pairs
b. 5 pairs
c. 6 pairs
d. 15 pairs
e. 13 pairs
Assume that the firefighters have gone without a pay increase for 4 years during a tough
time in their city’s finances. Suppose that things start to look up and the Mayor wants to
make up for lost time. If the CPI in 2002 was 125 and 150 in 2006, how much will
salaries have to increase to bring the firefighters back up to their real income from
2002?
a. 150.0%
b. 125.0%
c. 20.0%
d. 16.7%
e. 25.0%