Archives: Quiz

The most important automatic stabilizer is a. open-market operations. b. the tax system. c. unemployment compensation. d. welfare benefits. In a market economy, supply and demand are important because they a. are direct policy tools used by government agencies to […]

Fretonia and Libstien are the same except Fretonia has a larger capital stock. Both countries undertake policies that raise their saving rates to the same higher level. We would expect that a. both countries would have permanent increases in their […]

What would happen to the equilibrium price and quantity of latts if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make latts, and scientists discovered that latts […]

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that a. the dollar value of savings increased at 2 percent, and the purchasing power of savings increased […]

A firm has four different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B […]

High and unexpected inflation has a greater cost a. for those who borrow than for those who save. b. for those who hold a little money than for those who hold a lot of money. c. for those whose wages […]

Fundamental analysis shows that stock in Widgets-R-Us has a present value that is lower than its price. a. This stock is overvalued; you should consider adding it to your portfolio. b. This stock is overvalued; you shouldn’t consider adding it […]

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to a. decrease consumption, which shifts aggregate supply left. b. decrease consumption, which shifts aggregate demand left. c. increase consumption, which shifts aggregate supply […]

When the consumer price index rises, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of […]

Which of the following individuals serve a four-year term? a. the members of the Board of Governors b. the Chair of the Board of Governors c. the members of the FOMC d. All of the above are correct. The gains […]

If Huedepool Beer runs into financial difficulty, the stockholders as a. part owners of Huedepool are paid before bondholders get paid anything at all. b. part owners of Huedepool are paid after bondholders get paid. c. creditors of Huedepool are […]

Investment in human capital has opportunity costs, but investment in physical capital does not. a. True b. False Inflation a. leads people to use more resources to reduce money holdings. There is no way it can make labor markets work […]

Which of the following is a source of frictional unemployment? a. changes in the composition of demand among industries or regions b. minimum wages c. labor unions d. None of the above is correct. The adult population in the town […]

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant? a. substitution bias b. introduction of new goods c. unmeasured quality change d. income bias If the Fed announced a policy […]

A likely example of complementary goods for most people would be a. canoes and paddles. b. snow mobiles and sofas. c. coffee and tea. d. tennis balls and basketballs. The country of Yokovia does not trade with any other country. […]

Paul, a U.S. citizen, builds a telescope factory in Israel. His expenditures a. increase U.S. and Israeli net capital outflow. b. increase U.S. net capital outflow, but decrease Israeli net capital outflow. c. decrease U.S. net capital outflow, but increase […]

Table 3-22 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. Refer to Table3-22. Assume that Zimbabwe and Portugal each has 60 machine minutes available. Originally, each country divided its time equally […]

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply? a. $50 b. $100 […]

Table 4-13 The demand schedule below pertains to sandwiches demanded per week. RefertoTable4-13.Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: x = 2. The current price of a sandwich is $3.00. The market […]

Typical estimates of the sacrifice ratio suggest that a one-percentage-point reduction in the inflation rate requires a. a sacrifice of 5 percent of annual output. b. a sacrifice of 5 percent of government spending. c. an increase in the unemployment […]

Economists would predict that, other things the same, the more generous unemployment compensation a country has, the a. shorter the duration of each spell of unemployment and the higher the unemployment rate. b. shorter the duration of each spell of […]

Government-run employment agencies and public training programs are operated by the government to try to facilitate job search and reduce unemployment. a. Almost all economists agree that such programs are of no use. b. Almost all economists agree that such […]

Monetary neutrality means that a change in the money supply a. does not change real GDP. Most economists think this is a good description of the economy in the short run and in the long run. b. does not change […]

Tom Brady should probably not mow his own lawn because a. his opportunity cost of mowing his lawn is higher than the cost of paying someone to mow it for him. b. he has a comparative advantage in mowing his […]

An American retailer purchased 100 pairs of shoes from a company in Mexico in the second quarter of 2016 but does not sell them to a consumer until the third quarter of 2016. In which quarter(s) does(do) the value of […]

The Federal Reserve a. does not have an inflation target; if it did it would likely be 1% or less. b. does not have an inflation target; if it did it would likely be in the range of 2%. c. […]

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of a. crystal to be unaffected. b. crystal to decrease. c. crystal to increase. d. lead to increase. […]

One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy. a. True b. False Which of the following is an example of a produced factor […]

Consider three different closed economies with the following national income statistics. Country A has taxes of $40 billion, transfers of $20 billion, and government expenditures on goods and services of $30 billion. County B has private savings of $60 billion, […]

In the long run a reduction in the money supply growth rate affects a. the inflation rate and the natural rate of unemployment. b. the inflation rate but not the natural rate of unemployment. c. neither the inflation rate nor […]

A yard sale is an example of a market. a. True b. False Suppose that an anti-smoking campaign in Moscow, Russia, is successful so that Muscovites smoke less and chew gum more. Tobacco companies lay off workers, while chewing gum […]

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Japan, then which of the following falls? a. the U.S. real exchange rate, but not the U.S. nominal exchange […]

RefertoFigure35-7. The economy would move from C to B a. in the short run if money supply growth increased unexpectedly. b. in the short run if money supply growth decreased unexpectedly. c. in the long run if money supply growth […]

A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010, a. real output and the price level […]

Figure 3-3 Refer to Figure3-3. If Dina must work 0.25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work? a. 40 hours b. 100 hours c. 400 hours d. 1600 hours […]

A reduction in personal income taxes increases Aggregate Demand through a. an increase in investment spending. b. an increase in national savings. c. an increase in private savings. d. an increase in personal consumption. Which of the following rises when […]

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow. a. True b. False Which of the following is notcorrect? a. A risk averse person might be willing to hold stocks. b. […]

Suppose buyers of computers and printers regard the two goods as complements. Then an increase in the price of computers will cause a(n) a. decrease in the demand for printers and a decrease in the quantity supplied of printers. b. […]

The field of finance primarily studies a. how society manages its scarce resources. b. the implications of time and risk for allocating resources over time. c. firms’ decisions concerning how much to produce and what price to charge. d. how […]

A U.S. grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya. It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers. As a result of this exchange, by how much […]

A decrease in government spending a. increases the interest rate and so investment spending increases. b. increases the interest rate and so decreases investment spending decreases. c. decreases the interest rate and so investment spending increases. d. decreases the interest […]

If a country has a trade surplus a. it has positive net exports and positive net capital outflow. b. it has positive net exports and negative net capital outflow. c. it has negative net exports and positive net capital outflow. […]

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced a. 5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second […]

If a country’s purchases of foreign assets exceeds foreign purchases of domestic assets, that country has a. positive net exports and positive net capital outflows. b. positive net exports and negative net capital outflows. c. negative net exports and positive […]

A production possibilities frontier is a straight line when a. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. b. an economy is interdependent and engaged in trade […]

If the consumer price index is 120 in 2009 and 139.2 in 2010, then the rate of inflation for 2010 is 39.2 percent. a. True b. False Which of the following is an example of a normative, as opposed to […]

When the market price is above the equilibrium price, the quantity of the good demanded exceeds the quantity supplied. a. True b. False Real Foods produced 400,000 cans of diced tomatoes last year and 460,000 cans of diced tomatoes this […]

According to liquidity preference theory, if the price level decreases, then a. the interest rate falls because money demand shifts right. b. the interest rate falls because money demand shifts left. c. the interest rate rises because money supply shifts […]

If a good is normal, then an increase in income will result in a(n) a. increase in the demand for the good. b. decrease in the demand for the good. c. movement down and to the right along the demand […]

What are the two shortrun effects of increasing the quantity of nation’s money? Write the formula for calculating a GDP deflator using only nominal and real GDP. If the inflation rate decreased from 3.33% to 2.90% between October and November, […]