Archives: Quiz

At the original exchange rate an import quota a. creates a surplus in the market for foreign-currency exchange, so the exchange rate rises. b. creates a surplus in the market for foreign-currency exchange, so the exchange rate falls. c. creates […]

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing. a. True b. False If purchasing-power parity holds, then the value of the a. real exchange rate is equal to […]

Most economists believe that in the long run, changes in the money supply a. affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. b. affect nominal but not real variables. This […]

Which of the following is always correct? a. Y – I = NCO b. NCO = NX c. NX = I d. All of the above are correct. From the standpoint of the economy as a whole, the role of […]

According to the theory of liquidity preference, a decrease in the price level causes the a. interest rate and investment to rise. b. interest rate and investment to fall. c. interest rate to rise and investment to fall. d. interest […]

Suppose Turkey increases its saving rate. In the long run a. the growth rates of productivity and real GDP per person increase. b. productivity and real GDP per person increase. c. the growth rate of productivity increases, and real GDP […]

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink. a. True b. False When an economy is operating at a point on its production possibilities frontier, then a. consumers are content with the mix of goods […]

If over the next year the inflation rate in the euro area is higher than the inflation rate in Japan, then the euro should depreciate relative to the Japanese yen. a. True b. False In the United States in 2012, […]

Interdependence among individuals and interdependence among nations are both based on the gains from trade. a. True b. False In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals […]

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that a. the United States should produce more pork than what it requires and export some of it to Mexico. b. […]

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal a. cost of leaving was greater than the marginal benefit. b. benefit of […]

Most studies have found that tobacco and marijuana are substitutes rather than complements. a. True b. False Figure 2-4 Refer to Figure2-4. At which point is this economy producing its maximum possible quantity of doors? a. R b. S c. […]

In the long run import quotas do not affect the size of net exports. a. True b. False Table 28-11 2010 Labor Data for Tajnia RefetoTable28-11.The unemployment rate of Tajnia in 2010 is about 18.4 percent. a. True b. False […]

The interest-rate effect a. depends on the idea that decreases in interest rates increase the quantity of goods and services demanded. b. depends on the idea that decreases in interest rates decrease the quantity of goods and services demanded. c. […]

When two variables move in the same direction, the curve relating them is a. upward sloping, and we say the variables are positively related. b. upward sloping, and we say the variables are negatively related. c. downward sloping, and we […]

According to classical macroeconomic theory, changes in the money supply affect a. real GDP and the price level. b. real GDP but not the price level. c. the price level, but not real GDP. d. neither the price level nor […]

Actively managed mutual funds usually fail to outperform index funds, and this fact provides evidence in favor of the efficient markets hypothesis. a. True b. False If a rich country reduced subsidies to domestic producers of goods that poor countries […]

When the Fed lowers the growth rate of the money supply, it must take into account a. only the short-run effect on production. b. only the short-run effects on inflation and production. c. only the long-run effect on inflation. d. […]

Corporations receive no proceeds from the resale of their stock. a. True b. False Table 23-7 The table below contains data for the country of Togogo. The base year is 1974. RefertoTable23-7.From 1976 to 1977, a. inflation was 33.3% and […]

Other things the same,as the price level falls, which of the following increases? a. lending and investment spending b. lending, but not investment spending c. investment spending, but not lending d. neither investment spending nor lending If there are diminishing […]

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at a. prices at and above the equilibrium price. b. prices at and below the equilibrium price. c. prices […]

Real GDP a. moves in the opposite direction as unemployment. b. increases as production falls. c. falls when households save a smaller fraction of their income. d. All of the above are correct. Figure 33-7. RefertoFigure33-7. Suppose the economy starts […]

The Council of Economic Advisers a. was created in 1946. b. advises the president of the United States on economic policy matters. c. writes the annual EconomicReportofthePresident. d. All of the above are correct. Normative statements are a. not usually […]

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen? a. People who held money would feel poorer. b. Prices would rise. c. People who had lent money at […]

Suppose that over the last twenty-five years a country’s nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person? a. […]

Figure 3-21 Refer to Figure3-21. If Uzbekistan and Azerbaijan each spends all its time producing the good in which it has a comparative advantage and trade takes place at a price of 12 bolts for 36 nails, then a. neither […]

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is a. 9/5 b. 5/4 c. 4/5 d. None […]

Table 28-4 2010 Labor Data for Adults (ages 16 and older) in Meditor RefetoTable28-4. What is the adult unemployment rate in Meditor? a. 4.2% b. 6.25% c. 6.7% d. 10% The natural rate of unemployment refers to the current unemployment […]

If Pdenotes the price of goods and services measured in terms of money, then a. 1/Prepresents the value of money measured in terms of goods and services. b. Pcan be regarded as the “overall price level.” c. an increase in […]

Each week, the Bureau of Labor Statistics computes and reports the consumer price index. a. True b. False From 1980-1987, U.S. net capital outflow as a percent of GDP became a a. larger positive number. b. smaller positive number. c. […]

A corporation’s earnings are the amount of revenue it receives for the sale of its products a. minus its cost of production as measured by its accountants. Earnings must be paid out as dividends. b. minus its cost of production […]

A reduction in the inflation rate would make relative prices a. less variable, making it more likely that resources will be allocated to their best use. b. less variable, making it less likely that resources will be allocated to their […]

Henry can make a bird house in 3 hours and he can make a bird feeder in 1 hour. The opportunity cost to Henry of making a bird house is 1/3 bird feeder. a. True b. False Comparative advantage is […]

Market failure is the ability of a single person to have a substantial influence on market prices. a. True b. False Table 3-20 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. […]

Fundamental analysis shows that Quadrangle Company is fairly valued. Then Quadrangle Company unexpectedly improves its production techniques and unexpectedly hires a new CEO away from another very successful competitor. Suppose this has no effect on the price of the stock […]

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of […]

Figure 33-4 RefertoFigure33-4. If the economy starts at A, a decrease in the money supply moves the economy a. to A in the long run. b. to C in the long run. c. back to A in the long run. […]

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is a. the $60 she earns working. b. the $60 […]

When a bank loans out $1,000, the money supply a. does not change. b. decreases. c. increases. d. may do any of the above. Figure 33-4 RefertoFigure33-4. In the short run, a favorable shift in aggregate supply would move the […]

The Federal Open Market Committee meets about a. every six days. b. every six weeks. c. every six months. d. every sixteen months. When Mario’s income decreases, he buys more pasta. For Mario, pasta is a normal good. a. True […]

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What […]

AA Appliances sells refrigerators. In 2015 it added $100,000 to its inventory. $10,000 of this addition was from used refrigerators, and the remaining $90,000 was from their purchases of newly manufactured refrigerators. How much of AA’s inventory is included in […]

A decrease in quantity demanded a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the […]

Imagine that someone offers you $Xtoday or $1,500 in 5 years. If the interest rate is 4 percent, then you would prefer to take the $X today if and only if a. X> 1,055.56. b. X> 1,120.89. c. X> 1,232.89. […]

Figure 4-25 The graph below pertains to the supply of paper to colleges and universities. RefertoFigure4-25.All else equal, buyers expecting paper to be more expensive in the future would cause a current move from a. x to y. b. y […]

When supply and demand both increase, equilibrium a. price will increase. b. price will decrease. c. quantity may increase, decrease, or remain unchanged. d. price may increase, decrease, or remain unchanged. In 1974, one could buy a theater for $1.25. […]

If companies from foreign countries build and operate factories in China, then China’s productivity a. and the wages of Chinese workers increase. b. increases but the wages of Chinese workers decrease. c. decreases but the wages of Chinese workers increase. […]

Which of the following is not correct? a. Economists use some familiar words in specialized ways. b. Economics has its own language and its own way of thinking, but few other fields of study do. c. Supply, demand, elasticity, comparative […]

Keynes explained that recessions and depressions occur because of a. excess aggregate demand. b. inadequate aggregate demand. c. excess aggregate supply. d. inadequate aggregate supply. According to studies using international data, an increase in the saving rate a. does not […]

A likely example of substitute goods for most people would be a. tables and chairs. b. bicycles and helmets. c. apple juice and orange juice. d. coffee and sugar. U.S. GDP includes the market value of rental housing, but not […]