Archives: Quiz

If a government wants to increase the value of its currency in foreign exchange markets, it can: A) use contractionary monetary policy. B) use expansionary monetary policy. C) decrease interest rates. D) sell its currency. Economists argue that money is […]

A fall in the market interest rate makes any investment project: A) less profitable if the funds were borrowed and more profitable if it came from retained earnings. B) less profitable whether the funds were borrowed or came from retained […]

An example of physical capital is: A) a truck a company purchases for deliveries. B) a worker who physically learns to work on a truck his company buys. C) a truck a worker buys for personal use. D) a truck […]

When a market begins to engage in international trade: A) producers in the exporting industry may be better off. B) consumers of the imported good may be worse off. C) consumers of the exported good may be better off. D) […]

An advantage to floating exchange rates is that they help: A) insulate countries from currency fluctuations. B) insulate countries from recessions starting in other countries. C) keep exports from replacing domestic jobs. D) keep export prices down. If Mega Corp. […]

Sometimes the government varies its spending, depending on the needs of the country. This statement best represents the economic concept that: A) resources should be used as efficiently as possible to achieve society’s goals. B) when markets don’t achieve efficiency, […]

Which one of the following transactions is included in a current year’s GDP as investment spending? A) ABC company purchased 10,000 shares of IBM stock. B) Ronnie bought a new BMW. C) Anton purchased his friend’s condo. D) Maggie bought […]

Scenario: A Small Economy Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. Look at the scenario A Small Economy. There is a new government, […]

Look at the table Comparative Advantage I. The opportunity cost of producing 1 box of cell phones for Finland is _____ box(es) of herring. A) 10 B) 0.5 C) 5 D) 0.1 Contractionary fiscal policy includes: A) decreasing taxes. B) […]

The long-run Phillips curve: A) depicts the negative relationship between the unemployment rate and the inflation rate. B) suggests that policies have little effect on the natural rate of unemployment in the long run. C) explains how expansionary policies can […]

The labor force is equal to the: A) sum of employment and unemployment. B) population minus the number of employed. C) sum of the employed and the underemployed. D) number of people working. Fertilizer, used to grow pumpkins, is a […]

The financial meltdown in 2008″2009 was partially the result of a faulty economic model that underestimated the risk of mortgage-backed securities. A) True B) False Scenario: Gizmovia The Republic of Gizmovia wants to maintain the exchange rate of its currency, […]

Scenario: Fiscal Policy Consider the economy of Arcadia. Its households spend 75% of increases in their income. There are no taxes and no foreign trade. Its currency is the arc. Potential output is 600 billion arcs. Look at the scenario […]

A key insight into macroeconomics is that in the short run the combined effect of individual decisions: A) is always the same as what one individual intended. B) may be very different from what any one individual intended. C) is […]

Scenario: Gizmovia The Republic of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current exchange rate for the gizmo is $0.40. Look at the scenario Gizmovia. At the target rate of $0.50: […]

If the United States exports $500 of goods and services and imports $700 of goods and services, net exports are $1,200. A) True B) False Figure: Demand and Supply Look at the figure Demand and Supply. The slope of the […]

Table: The Lemonade Market Look at the table The Lemonade Market. If the price of a cup of lemonade is $1, there will be _____ in the market. A) equilibrium B) a shortage of 150 cups C) a shortage of […]

The inflation rate is the: A) price level in the current year minus the price level in the previous year. B) price level in the current year plus the price level in the previous year. C) percentage change in the […]

Figure: Slope Look at the figure Slope. In the graph, the slope of the line between points A and B is: A) +8. B) “8. C) “2. D) +2. Holding everything else constant, the government’s budget balance during an expansion […]

If the marginal propensity to consume equals 0.75, then based on the simple model presented in this chapter, one would expect a $100 decrease in investment spending to lead to a total _____ in spending of _____. A) increase; $100. […]

Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would expect to see: A) an increase in demand for Raclette cheese. B) an […]

Which of the following factors have contributed to the lack of economic growth in Latin America? I. low rates of savings and investment II. low value on education III. political instability A) I only B) II only C) III only […]

The producer price index is likely to respond more quickly to price changes than the other indexes, so it is regarded as a warning sign of inflation. A) True B) False Some economists have challenged the efficient markets hypothesis because […]

GDP is the: A) total market value of all final goods and services produced in an economy in one year. B) total accumulated wealth of an economy. C) volume of all dollar transactions made in an economy in one year. […]

Suppose the economy is in long-run equilibrium at full employment levels of real GDP. In the long run, if the money supply increases, we would expect _____ in the price level and _____ in real GDP. A) an increase; no […]

When the budget is in deficit, the government generally: A) raises taxes. B) increases the public debt. C) sells public assets like national parks. D) decreases military spending. An increase in the value of a floating currency is called an […]

To maintain its target exchange rate for the yuan, China had to sell yuan and buy dollars and other currencies. A) True B) False If banks decide to hold some of their excess reserves instead of lending them all out: […]

Policies that limit imports, usually to insulate domestic producers from foreign competition, are known as: A) import-competing clauses. B) import reduction acts. C) trade protection. D) competition protection. If wages grew at 5% last year and average prices grew at […]

In the long run changes in the money supply will change prices, real GDP, and interest rates. A) True B) False Suppose a country has floated its currency and the central bank sets a contractionary monetary policy. Which of the […]

In a single day, Sarah can produce 10 hamburgers, and Abe can produce 5 hamburgers. Therefore, _____ has a(n) _____ advantage in making hamburgers. A) Sarah; comparative B) Sarah; absolute C) Abe; comparative D) Abe; absolute If the exchange rate […]

A decrease in inventories is: A) a fall in investment spending that will lead to a drop in sales. B) an increase in investment spending that will lead to an increase in sales. C) thought to have no impact on […]

Included in M1 are: A) checkable bank deposits. B) savings deposits. C) U.S. Treasury bills. D) demand deposits, savings deposits, and U.S. Treasury bills. Nearly all economists agree that decreases in money supply can _____ aggregate _____. A) increase; supply […]

Last week Stephanie quit her job as a copywriter at an advertising agency. She has spent the past few days browsing the help wanted ads but hasn’t found anything that matches her skills. Stephanie is best classified as: A) structurally […]

Figure: The Market for Oranges in South Africa Look at the figure The Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is P1. When the economy is opened to trade, the price falls […]

Structural unemployment: A) results when there are more job hunters than jobs. B) affects those entering the labor force for the first time. C) is zero when the economy is in full employment. D) is caused by short-run economic fluctuations. […]

When an economy has high inflation: A) wage and price stickiness lessens or disappears. B) the Keynesian model of the economy is most relevant. C) wages become more inflexible as workers wait for prices to stabilize. D) changes in the […]

In a particular labor market, the demand for labor is given by W = 20 ” (1 / 100)L, and the supply of labor is given by W = 4 + (1 / 100)L, where W is the wage rate, […]

In the long run, an increase in AD will result in: A) no change in the aggregate price level. B) no change in the aggregate output level. C) increases in both the aggregate price level and the aggregate output level. […]

Wages are: A) the income households earn by selling their labor. B) the interest earned from bonds. C) rent earned from the use of land to firms. D) the indirect ownership of the physical capital used by firms. In one […]

Countries that engage in trade will tend to specialize in goods in which they have _____ and will _____ those goods. A) a comparative advantage; import B) an absolute advantage; export C) a comparative advantage; export D) an economic profit; […]

The multiplier process: A) explains how spending continues indefinitely with continuous rounds of spending. B) ends after one round of spending and with total spending limited to the initial change in spending. C) occurs only when economies are in an […]

Figure: Inflationary and Recessionary Gaps Look at the figure Inflationary and Recessionary Gaps. If the economy is in short-run equilibrium at Y1 in panel (b), to return to potential output at YP policy makers should use: A) contractionary stabilization policy. […]

Economists define an efficient use of resources as a situation in which: A) one person can be made better off but only by making another person worse off. B) all persons can be made better off without making anyone worse […]

Most of a bank’s short-term liabilities are: A) loans from the Federal Reserve. B) loans from the U.S. Treasury. C) loans to its customers. D) customers’ deposits. The aggregate production function exhibits diminishing returns to labor but not to physical […]

Which of the following is an example of investment spending in macroeconomics? A) The owner of a Domino’s Pizza store has employed two students to deliver pizzas. B) The manager of a Domino’s Pizza store has deposited cash in the […]

Look at the table Peanut Butter and Jelly Economy. Between 2010 and 2011, nominal GDP: A) increased by 12.5%. B) decreased by 12.5%. C) increased by 16.67%. D) increased by 31.25%. A household’s wealth is always equal to its income […]

The real exchange rate between the U.S. dollar and the Canadian dollar will remain constant if an increase in the value of the U.S. dollar against the Canadian dollar is offset by: A) inflation in the United States. B) inflation […]

Because one person’s spending is another person’s income, if one group in the economy spends more, they increase their share of income and decrease the incomes of other groups. A) True B) False The notion that there is a trade-off […]

The business cycle is the long-run alternation between downturns and upturns. A) True B) False When the unemployment rate is high, there is political demand to increase the benefit period for unemployment compensation. In a standard analysis, this will lead […]

The Office of Management and Budget serves as the central bank of the United States. A) True B) False If the Federal Reserve wanted to increase the money supply, it could _____ the required reserve ratio, _____, and _____ bonds […]