For the U.S. economy, money holdings are a
a. large part of household wealth, and so the interest-rate effect is large.
b. large part of household wealth, and so the wealth effect is large.
c. small part of household wealth, and so the interest-rate effect is small.
d. small part of household wealth, and so the wealth effect is small.
If the central bank increased the money supply in response to a decrease in short-run
aggregate supply, unemployment would return towards its natural rate, but prices would
rise even more.
a. True
b. False
Saddle shoes are not popular right now, so very few are being produced. If saddle shoes
become popular, then how will this affect the market for saddle shoes?
a. The supply curve for saddle shoes will shift right, which will create a shortage at the
current price. Price will increase, which will decrease quantity demanded and increase
quantity supplied. The new market equilibrium will be at a higher price and higher
quantity.
b. The supply curve for saddle shoes will shift right, which will create a surplus at the
current price. Price will decrease, which will increase quantity demanded and decrease
quantity supplied. The new market equilibrium will be at a lower price and higher
quantity.
c. The demand curve for saddle shoes will shift right, which will create a shortage at the
current price. Price will increase, which will decrease quantity demanded and increase
quantity supplied. The new market equilibrium will be at a higher price and higher
quantity.
d. The demand curve for saddle shoes will shift right, which will create a surplus at the
current price. Price will decrease, which will increase quantity demanded and decrease
quantity supplied. The new market equilibrium will be at a lower price and higher
quantity.
Table24-11.Megan’s salary for three consecutive years, along with other values, are
presented in the table below.
RefertoTable24-11. Suppose the consumer price index for 2013 is not necessarily 235.
Then Megan’s 2013 salary represents more purchasing power than her 2011 salary as
long as the consumer price index for 2013 is
a. greater than 264.25.
b. less than 264.25.
c. greater than 258.71.
d. less than 258.71.
When the dollar depreciates, U.S.
a. exports and imports increase.
b. exports increase, while imports decrease.
c. exports decrease, while imports increase.
d. exports and imports decrease.
U.S. GDP includes estimates of the value of items that are produced and consumed at
home, such as housework and car maintenance.
a. True
b. False
The financial system coordinates investment and saving, which are important
determinants of long-run real GDP.
a. True
b. False
Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income,
would result in higher household saving because income that is saved would not be
taxed. Avik does not think that household saving would respond much to a change in
the tax laws. In this example, Yi and Avik
a. hold different normative views about the tax system.
b. disagree about the validity of a positive theory.
c. have a fundamental misunderstanding of the tax system.
d. More than one of the above is correct.
James owns two houses. He rents one house to the Johnson family for $10,000 per year.
He lives in the other house. If he were to rent the house in which he lives, he could earn
$12,000 per year in rent. How much do the housing services provided by the two
houses contribute to GDP?
a. $0
b. $10,000
c. $12,000
d. $22,000
An increase in the interest rate causes a decrease in the future value of $1,000 that you
have in a bank account today.
a. True
b. False
Figure 3-8
Refer to Figure3-8. If the production possibilities frontiers shown are each for one day
of production, then which of the following combinations of coffee and soybeans could
Chile and Colombia together make in a given day?
a. 4 pounds of coffee and 16 pounds of soybeans
b. 8 pounds of coffee and 15 pounds of soybeans
c. 16 pounds of coffee and 10 pounds of soybeans
d. 24 pounds of coffee and 4 pounds of soybeans
Which of the following domestically produced items is notincluded in GDP?
a. a bottle of shampoo
b. a hairdryer
c. a haircut
d. All of the above are included in GDP.
Consider five individuals with different occupations.
If this economy has money
a. Allen will buy from Betty
b. Betty will buy from Calvin
c. Eric will buy from Allen
d. None of the above are correct.
Productivity is the amount of goods and services
a. an economy produces. It is not linked to a nation’s economic policies.
b. an economy produces. It is linked to a nation’s economic policies.
c. produced for each hour of a worker’s time. It is not linked to a nation’s economic
policies.
d. produced for each hour of a worker’s time. It is linked to a nation’s economic
policies.
Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
RefertoTable3-20.What is Brad’s opportunity cost of producing one bushel of wheat?
a. 5/6 pound of beef
b. 6/5 pounds of beef
c. 3/5 pounds of beef
d. 5/3 pounds of beef
Figure 3-13
Refer to Figure3-13. Suppose Peru decides to increase its production of rubies by 30.
What is the opportunity cost of this decision?
a. 1/8 emerald
b. 1/3 emerald
c. 1 emerald
d. 3 emeralds
The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the
GDP accounts this transaction is included in
a. in government expenditures and exports.
b. government expenditures and imports.
c. exports, but not government expenditures.
d. imports, but not government expenditures.
If the U.S. imposed an import quota on furniture, U.S. net exports of furniture
a. and net exports of other U.S. goods and services would rise.
b. would rise but net exports of other goods and services would fall.
c. would fall but net exports of other goods and services would rise.
d. and net exports of other U.S. goods and services would fall.
Figure34-4.On the figure, MSrepresents money supply and MDrepresents money
demand.
RefertoFigure34-4. Suppose the money-demand curve is currently MD1. If the current
interest rate is 2, then
a. the quantity of money that people want to hold is less than the quantity of money that
the Federal Reserve has supplied.
b. people will respond by selling interest-bearing bonds or by withdrawing money from
interest-bearing bank accounts.
c. bond issuers and banks will respond by lowering the interest rates they offer.
d. in response, the money-demand curve will shift rightward from its current position to
establish equilibrium in the money market.
Which of the following is not an example of a natural experiment an economist might
use to evaluate a theory?
a. Transit ridership increased in Atlanta following an increase in gas prices.
b. Federal tax revenue increased following a decrease in the tax rate.
c. Students in a principles of microeconomics course are asked to play a game with
classmates to determine what decisions they make under certain circumstances.
d. Following the imposition of austerity measures, the growth rate of the economy in
Greece slowed.
A decrease in supply will cause an increase in price, which will cause a decrease in
quantity demanded.
a. True
b. False
A consumer buys toys made in China. The value of the toys is included only in the net
exports component of GDP.
a. True
b. False
Two countries can achieve gains from trade even if one country has an absolute
advantage in the production of both goods.
a. True
b. False
In the circular-flow diagram, which of the following items flows from households to
firms through the markets for the factors of production?
a. goods and services
b. land, labor, and capital
c. dollars spent on goods and services
d. wages, rent, and profit
The present value of any future sum of money is the amount that would be needed
today, at current interest rates, to produce that future sum.
a. True
b. False
Figure27-2. The figure shows a utility function for Britney.
RefertoFigure27-2. Suppose Britney begins with $1,050 in wealth. Which of the
following coin-flip bets would she definitely notbe willing to accept?
a. If it is “heads,” she wins $100; if it is tails, she loses $95.
b. If it is “heads,” she wins $150; if it is tails, she loses $150.
c. If it is “heads,” she wins $150; if it is tails, she loses $140.
d. She definitely would notaccept any of these bets.
There is a temporary adverse supply shock. Given the effects of this shock, if the
central bank chooses to return unemployment closer to its previous rate it would
a. raise the rate at which it increases the money supply. In the long run this will shift the
short-run Phillips curve right.
b. raise the rate at which it increases the money supply. In the long run this will shift the
short-run Phillips curve left.
c. reduce the rate at which it increases the money supply. In the long run this will shift
the short-run Phillips curve right.
d. reduce the rate at which it increases the money supply. In the long run this will shift
the short-run Phillips curve left.
Suppose a country has government expenditures of $3,500, taxes of $2,200,
consumption of $9,000, exports of $2,500, imports of $2,700, transfer payments of
$750, capital depreciation of $800, and investment of $3,000. GDP equals
a. $24,450.
b. $11,550.
c. $15,300.
d. $20,700.
Figure26-4.On the horizontal axis of the graph, Lrepresents the quantity of loanable
funds in billions of dollars.
RefertoFigure26-4. If the equilibrium quantity of loanable funds is $56 billion and if
the rate of inflation is 5 percent, then the equilibrium nominal interest rate is
a. 11 percent.
b. approximately 6 percent.
c. between 6 percent and 8 percent.
d. between 11 percent and 13 percent.
Savings deposits are included in
a. M1 but not M2.
b. M2 but not M1.
c. M1 and M2.
d. neither M1 nor M2.
A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery
store chain builds and manages a new warehouse in Honduras. Which one(s) of these is
foreign direct investment? Which one(s) would be taken into account when computing
U.S. net capital outflows?
Within the U.S. population, blacks of prime working age (ages 25-54) have higher rates
of unemployment than whites of prime working age (ages 25-54), regardless of gender.
a. True
b. False
You and your friend work together for 4 hours to produce a total of 8 bookcases. What
is productivity?
a. 16 bookcases
b. 8 bookcases
c. 2 bookcases per hour
d. 1 bookcase per hour
The point where both x and y are zero is known as the
a. origin.
b. null.
c. zero coordinate.
d. center.
During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation
was 1.5 percent, but people had been expecting 1 percent. This difference between
actual and expected inflation
a. transferred wealth from the borrower to you and caused your after-tax real interest
rate to be 0.5 percentage points higher than what you had expected.
b. transferred wealth from the borrower to you and caused your after-tax real interest
rate to be more than 0.5 percentage points higher than what you had expected.
c. transferred wealth from you to the borrower and caused your after-tax real interest
rate to be 0.5 percentage points lower than what you had expected.
d. transferred wealth from you to the borrower and caused your after-tax real interest
rate to be more than 0.5 percentage points lower than what you had expected.