When an economist is asked a question like “why is unemployment higher for teenagers
than for older workers?” the economist
a. is asked to explain the cause of an economic event.
b. is asked to recommend a policy to improve economic outcomes.
c. is asked as a policy adviser.
d. does not have enough information to respond.
What is the difference between a “change in supply” and a “change in quantity
supplied?” Graph your answer.
a. For each of the following changes, determine whether there will be a change in
quantity supplied or a change in supply.
i. a change in input costs
ii. a change in producer expectations
iii. a change in price
iv. a change in technology
v. a change in the number of sellers
Other things the same, as the number of stocks in a portfolio rises,
a. risk increases and the standard deviation of the return rises.
b. risk increases and the standard deviation of the return falls.
c. risk decreases and the standard deviation of the return rises.
d. risk decreases and the standard deviation of the return falls.
Figure 4-25
The graph below pertains to the supply of paper to colleges and universities.
RefertoFigure4-25.All else equal, a major paper manufacturer filing for bankruptcy
and shutting down as a result of an IRS tax evasion investigation would cause a move
from
a. x to y.
b. y to x.
c. SAto SB.
d. SBto SA.
Which of the following statements is correct for an open economy with a trade surplus?
a. The trade surplus cannot last for very many years.
b. The trade surplus must be offset by negative net capital outflow.
c. The trade surplus implies that the country’s national saving is greater than domestic
investment.
d. None of the above is correct.
Which of the following make(s) demand for U.S. dollars in the market for
foreign-currency exchange higher than otherwise?
a. a U.S. airline wanting buy jets made in France and a Swedish hospital wanting to buy
medical equipment made in the U.S.
b. a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting
to buy medical equipment made in the U.S.
c. a Swedish hospital wanting to buy medical equipment made in the U.S., but not a
U.S. airline wanting to buy jets made in France
d. neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm
wanting to buy computers made in South Korea
In years of economic contraction, firms throughout the economy increase their
production of goods and services, employment rises, and jobs are easy to find.
a. True
b. False
The ease with which an asset can be
a. traded for another asset determines whether or not that asset is a unit of account.
b. transported from one place to another determines whether or not that asset could
serve as fiat money.
c. converted into a store of value determines the liquidity of that asset.
d. converted into the economy’s medium of exchange determines the liquidity of that
asset.
As the aggregate demand curve shifts rightward along a given aggregate supply curve,
a. unemployment and inflation are higher.
b. unemployment and inflation are lower.
c. unemployment is higher and inflation is lower.
d. unemployment is lower and inflation is higher.
A U.S.-owned automobile factory uses $100,000 worth of parts purchased from foreign
countries along with U.S. inputs to produce 30 cars worth $20,000 each. Twenty of
these cars are sold and 10 are left in inventory. How much did these actions add to
GDP?
a. $300,000
b. $500,000
c. $600,000
d. $700,000
The New York Federal Reserve Bank
a. president always gets to vote at the FOMC meetings.
b. conducts open market transactions.
c. is one of 12 regional Federal Reserve Banks.
d. All of the above are correct.
Which of the following is notcorrect?
a. The inflation rate is measured as the percentage change in a price index.
b. For the last 40 or so years, U.S. inflation hasn”t shown much variation from its
average rate of about 2 percent.
c. During the 19th century there were long periods of falling prices in the U.S.
d. Some economists argue that the costs of moderate inflation are not nearly as large as
the general public believes.
You put money in the bank. The increase in the dollar value of your savings
a. and the change in the number of goods you can buy with your savings are both
nominal variables.
b. and the change in the number of goods you can buy with your savings are both real
variables.
c. is a nominal variable, but the change in the number of goods you can buy with your
savings is a real variable.
d. is a real variable, but the change in the number of goods you buy with your savings is
a nominal variable.
Figure 35-9. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the right-hand diagram, “Inf Rate” means
“Inflation Rate.”
RefertoFigure35-9. Subsequent to the shift of the Phillips curve from PC1to PC2, the
curve will soon shift back to PC1if people perceive the
a. increase in the inflation rate as a temporary aberration.
b. economic boom as a temporary aberration.
c. increase in the inflation rate as a sign of a new era of higher inflation.
d. economic boom as a sign of a new era of higher economic growth.
The time inconsistency of policy implies that
a. what policymakers say they will do is generally what they will do, but people don’t
believe them because of current policy.
b. when people expect that inflation will be low, it is easier for the Fed to increase
output by increasing the money supply.
c. people will believe Fed policy will be less inflationary than the Fed claims.
d. what policymakers say they will do is usually not what they do, but people believe
them anyway.
Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and
the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and
Mexico over this one-year period?
a. 3.3 percent for Canada and 9.1 percent for Mexico
b. 3.3 percent for Canada and 8.3 percent for Mexico
c. 3.2 percent for Canada and 9.1 percent for Mexico
d. 3.2 percent for Canada and 8.3 percent for Mexico
If you were to start a business delivering documents, you might need to purchase cell
phones, bicycles, desks, and chairs.
a. These purchases are called capital investment. If you raise the funds to purchase them
from others you are a saver.
b. These purchases are called capital investment. If you raise the funds to purchase them
from others you are a borrower.
c. These purchases are called consumption. If you raise the funds to purchase them from
others you are a saver.
d. These purchases are called consumption. If you raise the funds to purchase them
from others you are a borrower.
Country A has real GDP per person of 250,000 while Country B has real GDP per
person of 500,000. All else constant, Country A will eventually have a higher standard
of living than Country B if
a. the level of saving per person is 5.000 in Country A and 7,500 in Country B.
b. the level of saving per person is 3,000 in Country A and 6,000 in Country B.
c. Both of the above are correct.
d. None of the above are correct.
Liquidity preference theory is most relevant to the
a. short run and supposes that the price level adjusts to bring money supply and money
demand into balance.
b. short run and supposes that the interest rate adjusts to bring money supply and money
demand into balance.
c. long run and supposes that the price level adjusts to bring money supply and money
demand into balance.
d. long run and supposes that the interest rate adjusts to bring money supply and money
demand into balance.
If there are floods or droughts or a decrease in the availability of raw materials
a. aggregate supply shifts right.
b. output falls in the short run.
c. prices fall in the short run.
d. None of the above is correct.
Net exports equal
a. exports plus imports.
b. exports minus imports.
c. imports minus exports.
d. GDP minus imports.
Figure 2-23
Refer to Figure2-23. This economy fully employs its resources when it produces 35
dishwashers and zero doghouses.
a. True
b. False
If inflation is greater than expected, then the unemployment rate is
a. above the natural rate. In the long run the short-run Phillips curve will shift right.
b. above the natural rate. In the long run the short-run Phillips curve will shift left.
c. below the natural rate. In the long run the short-run Phillips curve will shift right.
d. below the natural rate. In the long run the short-run Phillips curve will shift left.
All Fed purchases and sales of
a. corporate stocks and bonds are conducted at the New York Fed’s trading desk.
b. government bonds are conducted at the New York Fed’s trading desk.
c. real estate and other real assets are conducted by the Federal Open Market
Committee.
d. All of the above are correct.
Economic variables whose values are measured in goods are called
a. dichotomous variables.
b. nominal variables.
c. classical variables.
d. real variables.
Table 24-4
The table below pertains to Studious, an economy in which the typical consumer’s
basket consists of 5 books and 10 calculators.
RefertoTable24-4.The inflation rate was
a. 24.3 percent in 2013 and 22.5 percent in 2014.
b. 23.8 percent in 2013 and 9.5 percent in 2014.
c. 23.8 percent in 2013 and 7.7 percent in 2014.
d. 24.3 percent in 2013 and 7.3 percent in 2014.
If at a given real interest rate desired national saving is $60 billion, domestic investment
is $30 billion, and net capital outflow is $20 billion, then at that real interest rate in the
loanable funds market there is a
a. surplus. The real interest rate will rise.
b. surplus. The real interest rate will fall.
c. shortage. The real interest rate will rise.
d. shortage. The real interest rate will fall.
Which bond is likely to have higher interest rate due to a higher default risk?
a. A share of stock issued by Apple.
b. A corporate bond issued by Apple.
c. A junk bond.
d. A U.S. government bond.
You bought some shares of stock and, over the next year, the price per share increased
by 5 percent, as did the price level. Before taxes, you experienced
a. both a nominal gain and a real gain, and you paid taxes on the nominal gain.
b. both a nominal gain and a real gain, and you paid taxes only on the real gain.
c. a nominal gain, but no real gain, and you paid taxes on the nominal gain.
d. a nominal gain, but no real gain, and you paid no taxes on the transaction.
In the basket of goods that is used to compute the consumer price index, the three
largest categories of consumer spending are
a. housing, transportation, and recreation.
b. housing, transportation, and food & beverages.
c. housing, food & beverages, and education & communication.
d. housing, medical care, and education & communication.
If the supply of loanable funds curve shifts right, then the equilibrium
a. interest rate and level of net capital outflows rise.
b. interest rate rises and the equilibrium level of net capital outflow falls.
c. interest rate falls and the equilibrium level of net capital outflow rises.
d. interest rate and level of net capital outflows fall.
When two variables have a negative correlation and the x-variable decreases,
a. the y-variable increases.
b. the y-variable decreases.
c. the y-variable stays the same.
d. the x-variable can never be positive.
The average price level is measured by
a. the price of oil.
b. the rate of inflation.
c. the nominal interest rate.
d. the GDP deflator.
Paper money
a. has a high intrinsic value.
b. is the primary medium of exchange in a barter economy.
c. is valuable because it is generally accepted in trade.
d. is valuable only because of the legal tender requirement.