Archives: Quiz

As long as the loanable funds market clears, Say’s law holds.. Of the following, which could cause the demand curve for personal computers to shift to the left? a. a decrease in the price of personal computers b. an increase […]

The demand curve for a foreign currency a. slopes upward b. slopes downward c. is horizontal d. has a slope of 45 degrees e. is vertical Because it lowers the amount of output per person, unemployment results in a. a […]

The money market is in equilibrium when there is no excess supply of or excess demand for bonds. Refer to Figure 8-3. This figure is known as a. the classical aggregate production function b. the Keynesian aggregate production function c. […]

As its capital stock increases, a nation will a. move rightward along a fixed production function b. move leftward along a fixed production function c. find its production function shifting upward d. find its production function shifting downward e. experience […]

If an excise tax is imposed on steak, a. the government’s tax revenue will decrease b. the government’s tax revenue will increase c. the amount of steak produced and sold will increase d. the market price of steak will decrease […]

Which of the following would be studied in macroeconomics? a. a drop in the price of personal computers b. an individual household’s decision on how to allocate its spending power c. a rise in employment in movie theaters across the […]

Which of the following is a definition of the consumption function? a. A functional relationship between real consumption spending and real disposable income b. A functional relationship between real consumption spending and the interest rate c. A functional relationship between […]

Of the following, which is true of the relationship between the quantity of a good supplied and its price? a. As price increases, the quantity supplied usually decreases. b. As price increases, the quantity supplied usually increases. c. As price […]

Macroeconomics studies the determination of a. total output, total employment, the general price level, and the general level of interest rates b. total output and the general level of interest rates only c. total employment and the general level of […]

Which of the following can happen? a. Prices are rising and the inflation rate is negative but rising. b. Prices are falling and the inflation rate is positive and falling. c. Prices are falling and the inflation rate is positive […]

A weakness of the market system of resource allocation is that a. such economies tend to be stagnant b. most participants in such an economy have low standards of living c. there are no limits on an individual’s freedom of […]

Suppose the Federal Reserve wants to increase the money supply. Which combination of actions would lead to the appropriate effect? a. Increase the discount rate, decrease the reserve ratio, sell bonds. b. Increase the discount rate, decrease the reserve ratio, […]

For the two year period ending in 2008-2009, what has been the number of bank failures? a. About 500 b. About 2,000 c. Fewer than 150 d. More than 5,000 e. Fewer than 1,000 According to the law of increasing […]

If the CPI for 2008 was 112, the typical market basket purchased that year would cost a. 12 percent more than the same market basket purchased the previous year b. 112 percent more than the same market basket purchased the […]

Stagflation a. is caused by a negative demand shock b. is theoretically impossible c. is a long-run phenomenon d. was rampant during the Great Depression e. is the combination of rising price levels and negative GDP growth Suppose that the […]

A critical assumption differs from a simplifying assumption in that a critical assumption a. is a means of getting rid of extraneous details in the model b. cannot affect the conclusions of the model c. can affect the conclusions of […]

Which of the following would be considered a resource cost of inflation? a. A cost of living adjustment b. Loss of purchasing power c. Additional trips to the bank d. Adjusting nominal interest rate to get real rates e. Creeping […]

The law of supply says that a. supply and income are inversely related b. supply follows demand c. quantity supplied equals quantity demanded d. price and quantity supplied are inversely related e. price and quantity supplied are directly related Suppose […]

If the Fed has a goal of stable real GDP and the government announces a tax cut, which of the following would occur? a. Money demand would not change, real GDP would not change, the interest rate would decrease, and […]

The money demand curve indicates the total quantity of money demanded in the economy at each a. price level b. level of GDP c. quantity of money supplied d. level of income e. interest rate “The Consumer Price Index increased […]

Suppose that the United States has an absolute advantage over Mexico in producing both agricultural and manufactured goods. In the U. S., the opportunity cost of 1 unit of agricultural output is 2 units of manufactured goods. In Mexico, the […]

The supply curve for a foreign currency typically a. is horizontal b. is vertical c. slopes downward d. slopes upward e. none of the above. An increase in the price level a. increases investment spending, thereby shifting the AD curve […]

Since a long run consists of many short runs, the classical model is a. incorrect every time we look at output data b. accurate during the short run c. paradoxically quite accurate in the long run; however, it is not […]

The economy’s money supply curve is vertical. In the classical model, beginning from an equilibrium in which the government is running a budget surplus a. the supply of loanable funds will be horizontal b. an increase in government spending will […]

The Phillips curve represents the Fed’s short-run choices between inflation and unemployment. Market equilibrium occurs at that price for which a. quantity supplied equals quantity demanded b. cost equals the wages to labor c. the surplus quantity drives increased demand […]

The Fed has been able to achieve a zero rate of inflation throughout most of the 1990s. In the Full Employment and Balanced Growth Act of 1978, Congress set a target rate of unemployment. The nation achieves this target rate […]

A rise in the interest rate tends to a. reduce many kinds of spending b. stimulate investment in high-profit industries c. cause bond prices to increase d. encourage confidence in the Fed’s control over the economy e. suggest a downturn […]

Refer to Figure 14-4. If the interest rate is currently 12 percent, we would expect the a. interest rate to fall to 10 percent b. interest rate to remain at 12 percent c. interest rate to fall to 6 percent […]

During a recession, both output and unemployment fall. The classical model’s theory of the interest rate does not apply in the short run. Answer: A Which of the following is a way in which a government could encourage spending on […]

The difference between microeconomics and macroeconomics is that a. microeconomics deals with only small numbers while macroeconomics is always dealing with numbers in the billions and trillions b. microeconomics deals with the economy as a whole while macroeconomics deals with […]

Stagflation is caused by a. a negative supply shock. b. a positive supply shock. c. a negative demand shock. d. a positive demand shock. e. none of the above. If Cathy has a bond that will pay $1,000 one year […]

Which of the following is a normative statement? a. Fifteen percent of Americans go without health insurance in a year. b. The Consumer Price Index rose three-tenths of one percent in May. c. An increase in the minimum wage will […]

Which of the following is the best definition of a spot market? a. A market in which a good is bought or sold with the idea that the price will increase in the future b. A market in which a […]

For society as a whole, producing more of one good or service has an opportunity cost because a. human wants are limited and resources are unlimited b. both human wants and resources are unlimited c. resources are limited; human wants […]

Which of the following best defines the specialization of resources? a. Workers are compensated as individuals. b. Special resources are needed to produce most goods. c. Each resource is paid for in full. d. Each resource is paid the most […]

If inflation is perfectly anticipated, benefits are indexed, and there are no restrictions on contracts, which group loses purchasing power because of inflation? a. Borrowers, lenders and retirees b. Only borrowers c. Neither lenders, borrowers, nor retirees d. Only lenders […]

Many less developed countries have low rates of economic growth because a. high population growth rates reduce living standards b. low population growth rates result in an inadequate labor supply c. high current output per capita reduces incentives for growth […]

Refer to Figure 9-12. Assume that a nation can slow its population growth rate so that it now requires only N’ worth of investment in capital to maintain current capital per worker. If the nation adopts such a policy but […]

Which combination of government policies would be most likely to increase labor supply? a. Increasing income tax rates and cutting transfer payments to the needy b. Decreasing income tax rates and cutting transfer payments to the needy c. Decreasing income […]

Which of the following annual real GDP growth rates would be needed just to maintain output per capita in the United States? a. 10.0 percent b. 2.5 percent c. 1.0 percent d. 7.0 percent e. 3.5 percent In the classical […]

In the classical view, all markets clear, except the labor market. Suppose that equilibrium in the dollar-pound market occurs where 300 million pounds are demanded at a price of $1.75 per pound. If the current exchange rate is $1.60 per […]

Improvements in the quality of goods and services over time a. cause GDP statistics to understate true output growth from year to year b. cause GDP statistics to overstate true output growth from year to year c. are fully accounted […]

Refer to Figure 14-3. What are the equilibrium interest rate and quantity of money? a. 10 percent and $500 billion b. 8 percent and $500 billion c. 6 percent and $500 billion d. 8 percent and $750 billion e. 6 […]

If there is a large increase in the price of oil and the Fed wishes to maintain stable output, which of the following should it do? a. Do nothing, because the self-correcting mechanism will adjust the economy b. Sell bonds […]

Which point in Figure 2-3 is not possible for this society to produce? Figure 2-3 a. A b. B c. C d. D e. E Suppose that the market for DVDs is initially at point A on demand curve D2 […]

Using the following information on a hypothetical economy in equilibrium, calculate total output for 2008. If exports are exactly equal to imports, total output for 2008 is a. $5.2 trillion b. $5.7 trillion c. $8.4 trillion d. $8.7 trillion e. […]

If the U.S. inflation rate is 3 percent annually and the Japanese inflation rate is 1 percent annually, by what percent would the dollar price of the yen need to change according to purchasing power parity? a. Appreciate by 2 […]

If there is a sudden increase in government spending, which of the following should the Fed do if it wants to keep the price level steady? a. Do nothing, since the self-correcting mechanism will adjust the economy b. Sell bonds […]

During the expansion phase of a business cycle a. employment and output are both at a peak b. employment and output are both rising c. employment is falling and output is rising d. unemployment is rising and output is falling […]

Refer to Figure 8-1. If the real hourly wage rate was $6, what would be the effect? a. There would be a shortage of 40 million workers and the wage rate would rise. b. There would be a shortage of […]