Archives: Quiz

According to the theory of efficiency wages, it may be profitable for firms to keep wages high even in the presence of a surplus of labor. a. True b. False When two variables have a negative correlation, a. when the […]

Other things the same, as the price level rises, a. the interest rate rises causing aggregate demand to shift. b. the interest rate rises causing a movement along a given aggregate-demand curve. c. the interest rate falls causing aggregate demand […]

Figure 2-8 Refer to Figure2-8. For this economy, as more and more hammers are produced, the opportunity cost of an additional hammer produced, in terms of nails, a. remains constant. b. increases. c. decreases. d. This answer cannot be determined […]

“When workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly.” This statement a. represents an unconventional view of the production process. b. […]

If businesses in general decide that they have overbuilt and so now have too much capital, their response to this would initially shift a. aggregate demand right. b. aggregate demand left. c. aggregate supply right. d. aggregate supply left. Which […]

Minimum wages create unemployment in markets where they create a a. shortage of labor. Minimum wage laws are not the predominant reason for unemployment in the U.S. b. shortage of labor. Minimum wage laws are the predominant reason for unemployment […]

Figure 2-23 RefertoFigure2-23. The opportunity cost of moving from point B to point D is 15 doghouses. a. True b. False It is claimed that mutual funds have two advantages. The first is that mutual funds allow people with small […]

In which of the following cases would there be an effect on the value of the U.S. consumer price index, but not on the value of the U.S. GDP deflator? a. All of the truck tires that are produced by […]

An adverse supply shock causes inflation to a. rise and the short-run Phillips curve to shift right. b. rise and the short-run Phillips curve to shift left. c. fall and the short-run Phillips curve to shift right. d. fall and […]

In the economy of Talikastan in 2015, consumption was $600, exports were $300, GDP was $1300, government purchases were $250, and investment was $300. What were Talikastan’s imports in 2015? a. -$150 b. -$200 c. $200 d. $150 The six […]

Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDs became more expensive, and DVD production technology improved, then the equilibrium price of a new DVD would a. rise. […]

GDP is defined as the a. value of all goods and services produced within a country in a given period of time. b. value of all goods and services produced by the citizens of a country, regardless of where they […]

As the interest rate falls, a. the quantity of money demanded falls, which would reduce a shortage. b. the quantity of money demanded falls, which would reduce a surplus. c. the quantity of money demanded rises, which would reduce a […]

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that arises from capital accumulation is not a free lunch. It requires that society a. conserve resources for future generations. b. sacrifice consumption […]

When a union bargains successfully with employers, in that industry, a. both wages and unemployment increase. b. wages increase and unemployment decreases. c. wages decrease and unemployment increases. d. both wages and unemployment decrease. People who are risk averse dislike […]

Trade allows a person to obtain goods at prices that are less than that person’s opportunity cost because each person specializes in the activity for which he or she has the lower opportunity cost. a. True b. False Ken and […]

A policy change that changes the natural rate of unemployment changes a. neither the long-run Phillips curve nor the long-run aggregate supply curve. b. both the long-run Phillips curve and the long-run aggregate supply curve. c. the long-run Phillips curve, […]

Figure26-5.Figure 26-5 shows the loanable funds market for a closed economy. RefertoFigure26-5.Starting at point A, the enactment of an investment tax credit would likely cause a. the quantity of loanable funds traded to increase to $125 and the interest rate […]

If the public decides to hold less currency and more deposits in banks, bank reserves a. decrease and the money supply eventually decreases. b. decrease but the money supply does not change. c. increase and the money supply eventually increases. […]

Over the past six decades, the U.S. economy has experienced a dramatic increase in the relative importance of international trade and finance. a. True b. False Table 23-6 The table below contains data for the country of Batterland, which produces […]

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories. a. True b. False Suppose that the central bank is required to follow a monetary policy rule to stabilize prices. If […]

Figure 28-3 RefetoFigure28-3.If the government imposes a minimum wage of $4, how many workers will be employed? a. 3,000 b. 4,000 c. 5,000 d. 7,000 According to liquidity preference theory, if the quantity of money demanded is greater than the […]

The sooner a payment is received and the higher the interest rate, the greater the present value of a future payment. a. True b. False Suppose that a worker in Boatland can produce either 5 units of wheat or 25 […]

Which of the following is notan example of physical capital? a. a new factory building b. a delivery van c. the knowledge of workers d. the office chair in a lawyer’s office According to liquidity preference theory, the money-supply curve […]

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has a. appreciated and so buys more Algerian goods. b. appreciated and so buys fewer Algerian goods. […]

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to a. both higher inflation and higher unemployment in the long run. b. higher inflation and no change in unemployment in the long […]

The term hyperinflationrefers to a. the spread of inflation from one country to others. b. a decrease in the inflation rate. c. a period of very high inflation. d. inflation accompanied by a recession. At the equilibrium real interest rate […]

From 1980 to 1987 a. foreigners were buying more assets from the United States than Americans were buying abroad. The United States was going into debt. b. Americans were buying more assets abroad than foreigners were buying from the United […]

If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate a. does not change. b. rises. c. declines d. None of the above is necessarily correct. An increase in […]

According to liquidity preference theory, if the price level a. fell, the interest rate would rise, and induce investment spending to rise. b. fell, the interest rate would fall, and induce investment spending to fall. c. rose, the interest rate […]

There is no shortage of scarce resources in a market economy because a. the government makes shortages illegal. b. resources are abundant in market economies. c. prices adjust to eliminate shortages. d. quantity supplied is always greater than quantity demanded […]

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 […]

In effect, a consumption tax would put all saving automatically into a tax-advantaged savings account similar to an Individual Retirement Account (IRA). a. True b. False In the circular-flow diagram, in the markets for a. goods and services, households and […]

If an economy with constant returns to scale were to double its physical capital stock, its available natural resources, and its human capital, but leave the size of the labor force the same, a. its output would stay the same […]

Unless two people who are producing two goods have exactly the same opportunity costs, then one person will have a comparative advantage in one good, and the other person will have a comparative advantage in the other good. a. True […]

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then a. employment and production rise. b. employment rises and production falls. c. employment falls and production rises. d. employment and production […]

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy a. a central bank. b. a charter bank. c. a national bank. d. a state bank. The value of the housing […]

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P? a. Yrose, Vrose b. Yfell, Vfell c. Yrose, Vfell d. Yfell, Vrose An […]

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, […]

An identity is an equation that a. describes an equilibrium. b. pertains to macroeconomics, not to microeconomics. c. must be true because of how the variables in the equation are defined. d. involves final goods, not intermediate goods. According to […]

Federal Reserve governors are given long terms to insulate them from politics. a. True b. False Which of the following is notan example of a durable good? a. a refrigerator. b. an automobile. c. a business suit. d. a furnace. […]

The opportunity cost of holding money a. decreases when the interest rate decreases, so people desire to hold more of it. b. decreases when the interest rate decreases, so people desire to hold less of it. c. increases when the […]

Suppose there is a tax increase. To stabilize output, the Federal Reserve will a. increase government spending. b. increase the money supply. c. decrease government spending. d. decrease the money supply. In the open-economy macroeconomic model, if there is currently […]

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then a. both the nominal and the real interest rate rise. b. neither the nominal nor the real interest rate rise. c. the […]

Todays demand curve for gasoline could shift in response to a change in a. todays price of gasoline. b. the expected future price of gasoline. c. the number of sellers of gasoline. d. All of the above are correct. When […]

If the U.S. real exchange rate is greater than 1, then there is the possibility of arbitraging by buying foreign goods to sell in the U.S. a. True b. False Which of the following is an example of a normative […]

Table24-12.Will’s expenditures on food for three consecutive years, along with other values, are presented in the table below. RefertoTable24-12.To the nearest dollar, Will’s 2010 food expenditures in 2009 dollars amount to a. $5,236. b. $5,431. c. $5,524. d. $5,608. Which […]

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, […]

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have a. higher than desired prices, which leads to an increase in the aggregate quantity of goods and […]

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run? a. both the natural rate of unemployment and the inflation rate b. the natural rate of unemployment, but […]