The inflation rate for a given year is found by taking the percentage change in the
Consumer Price Index (CPI) from the base year to the year in question.
The idea of opportunity cost suggests that the cost of a particular choice should be
measured by the
a. price of the good chosen
b. price of the good divided by income
c. value of the best alternative sacrificed
d. amount of the good consumed
e. sum of the costs of all foregone opportunities
Stocks and bonds are
a. financial assets; therefore, they are considered to be money
b. highly-liquid financial assets; therefore, they are considered to be money
c. not highly-liquid financial assets; therefore, they are not considered to be money
d. widely accepted means of payment; therefore, they are considered to be money
e. not financial assets; therefore, they are not considered to be money
The best economic theory is the one
a. whose assumptions most closely match reality
b. that yields the most accurate predictions
c. that most simply represents reality
d. that most closely matches the conscious behavior of economic decision makers
e. that includes the most details
It was the rapid and system-wide deleveraging that contributed to the downward spiral
of the 2008 financial crisis.
If there is a leftward shift of the money demand curve, which of the following should
the Fed do if it wants to keep the price level stable?
a. Lower its interest rate target
b. Sell bonds in the open market
c. Wait, since the price level does not usually change when the money demand curve
shifts
d. Raise its interest rate target
e. Buy bonds in the open market.
A key tool of countercyclical fiscal policy is
a. the interest rate
b. the federal funds rate
c. the tax code
d. the regulatory code
e. Presidential executive orders.
The choice between hawk and dove positions depends on
a. the extent of cyclical unemployment at the time of the decision
b. relative importance of short-run and long-run monetary considerations
c. cooperation between Congress and the monetary authorities
d. the frequency of negative supply shocks
e. the Fed’s relative concern for price and employment stability
Assume that the professors at a local college have gone without a pay increase for 4
years during a tough time. Suppose that things start to look up and the President of the
college wants to make up for lost time. If the CPI in 2002 was 150 and 175 in 2006,
how much will salaries have to increase to bring the faculty back up to their real income
from 2002?
a. 175.0%
b. 150.0%
c. 25.0%
d. 16.7%
e. 14.3%
If Americans buy 100 million British pounds at an equilibrium exchange rate of $2 per
pound, how many dollars are they supplying?
a. $2 million
b. $50 million
c. $2
d. $200 million
e. $100 million
If a commercial bank has liabilities valued at $150 million, a net worth of $50 million
and assets (not including loans) of $180 million, what is the value of the bank’s loans?
a. $180 million
b. $200 million
c. $20 million
d. $280 million
e. $80 million
If labor demand increases, the market wage rate will
a. increase
b. decrease
c. remain stable
d. decrease initially and then rise by a larger amount
e. decrease initially and then rise by a small amount
The rapid rise in oil prices during 2007-2008 can be explained by noting the fact that
a. the supply of oil increased more rapidly than the demand for oil increased
b. the demand for oil increased more rapidly than the supply for oil increased
c. the demand for oil decreased at the same time that the supply of oil increased
d. the quantity demanded of oil increased more rapidly than the quantity supplied of oil
increased
e. the quantity supplied of oil increased more rapidly than the quantity demanded of oil
increased
In deciding to produce more agricultural goods and fewer manufactured goods, a
society is addressing the question of
a. where on its production possibilities frontier to operate
b. what production methods should be used to produce goods and services
c. how will output be allocated among the individuals in the society
d. what prices will be charged for goods and services
e. the optimal degree of central planning
In order to enjoy a rising standard of living standard, a nation’s capital stock must grow
faster than
a. the rate of depreciation
b. the rate of inflation
c. its population
d. its financial assets
e. its overall rate of economic growth
By pursuing growth, some less developed countries have sacrificed other social goals,
especially
a. a clean environment
b. investment opportunities
c. human capital formation
d. physical capital formation
e. a high long-run standard of living
If you borrow money at a nominal interest rate of 5 percent and the inflation rate is 10
percent, what real interest rate will you pay?
a. -5 percent
b. 0.5 percent
c. 2 percent
d. 5 percent
e. 10 percent