Macro Final Exam
Chapter 14 #13 Compared to a portfolio composed entirely of stock, a portfolio that is 50% government bonds and 50% stock will have.. A. higher return and a higher level of risk B. higher return and a lower level of risk C. lower return and a lower level of risk D. lower return and higher level of risk
C
Chapter 14 #2 If a depositor puts $100 in a bank account that earns 4% interest compounded annually, how much will be in the account after five years? A. $104.00 B. $120.00 C. $121.67 D. $123.98 E. $400.00
C
Chapter 6 #8 Which of the following is an example of a price floor? A. Rent controls B. restricting gasoline prices to $2.00 per gallon when the equilibrium price is $3.00 per gallon C. the minimum wage D. all of the above are price floors
C
Chapter 4 #5 If an increase in consumer incomes leads to a decrease in the demand for camping equipment then camping equipment is... A. a complementary good B. a substitute good C. a normal good D. an inferior good E. none of the above
D
Chapter 18 #5 Which of the following is an example of foreign direct investment? A. McDonald's builds a restaurant in Moscow B. Columbia Pictures sells the rights to a movie to Russian movie studio C. General Motors buys stocks in Volvo D. General Motors buys steel from Japan
A
Chapter 1 #3 Economics is the study of how? A. To fully satisfy our unlimited wants B. Society manages its scarce resources C. To reduce our wants until we are satisfied D. To avoid having to make trade-offs E. Society manages its unlimited resources
B
Chapter 1 #9 Which of the following activities is most likely to produce an externality? A. A student sits at home and watches television B. A student has a party in her dorm room C. A student reads a novel for pleasure. D A student eats a hamburger in the student union
B
Chapter 10 #10 Real GDP is measure in ______ prices while nominal GDP is measured in ____ prices A. current year; base year B. base year; current year C. intermediate; final D. domestic; foreign E. foreign; domestic
B
Chapter 10 #2 The value of plant and equipment worn out in the process of manufacturing good and services is measured by.. A. consumption B. depreciation C. net national product D. investment E. intermediate production
B
Chapter 11 #13 Suppose your income rises from $19,000 to $31,000 while the CPI rises from 122 to 169. Your standard of living has likely... A. fallen B. risen C. stayed the same D. you can't tell without knowing the base year
B
Chapter 1 #2 Trade-offs are required because wants are unlimited and resources are? A. Efficient B. Economical C. Scarce D. Unlimited E. marginal
C
Chapter 11 #14 If the nominal interest rate is 7% and the inflation rate is 3%, then the real interest rate is.. A. -4% B. 3% C. 4% D. 10% E. 21%
C
Chapter 11 #16 If inflation is 8% and the real interest rate is 3% then the nominal interest rate should be A. 3/8% B. 5% C. 11% D. 24% E. -5%
C
Chapter 11 #5 The "basket" on which the CPI is based is composed of A. raw materials purchased by firms B. total current production C. products purchased by the typical consumer D. consumer production E. none of the above
C
Chapter 12 #3 When a nation has very little real GDP per person.. A. it is doomed toeing relatively poor forever B. it must be a small nation C. it has the potential to grow relatively quickly due to the "catch up effect" D. an increase in capital will likely have little impact on output E. none of the above is true
C
Chapter 13 #13 An increase in the budget deficit that causes the government to increase its borrowing A. shifts the demand for loanable funds to the right B. shifts the demand for loanable funds to the left C. shifts the supply for loanable funds to the left D. shifts the supply for loanable funds to the right
C
Chapter 13 #18 If Americans become less concerned with the future and save less at each real interest rate.. A. real interest rate fall, and investment falls B. real interest rate fall, and investment rises C. real interest rate rise and investment falls D. real interest rate rise and investments rises
C
Chapter 14 #1 The amount today that would be needed, at prevailing interest rates, to produce a particular sum in the future is known as A. compound value B. future value C. present value D. fair value E. beginning value
C
Chapter #9 Suppose the price level falls. Because of fixed nominal wage contracts, firms become less profitable, and they cut back on production. This is a demonstration of the.. A. sticky wage theory of the short run aggregate supply curve. B. sticky price theory of the short run aggregate supply curve C. misperceptions theory of the short run aggregate supply curve D. classical dichotomy theory of the short run aggregate supply curve
A
Chapter 1 #12 Which of the following statements is true about a market economy? A. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being B. Taxes help prices communicate costs and benefits to producers and consumers. C. With a large enough computer, central planners could guide production more efficiently than markets D. The strength of a market system is that it tends to distribute resources evenly across consumers
A
Chapter 10 #4 Gross domestic product can be measure as the sum of.. A. consumption, investment, government purchases, and net exports B. consumption, transfer payments, wages, profits C. investment, wages, profits, and intermediate production D. final goods and services, intermediate goods, transfer payments, and rent E. net national product, gross national product, and disposable personal income
A
Chapter 11 #6 If there is an increase in the price of apples that cause consumers to purchase fewer pounds of apples and more pounds of oranges, the CPI will suffer from.. A. substitution bias B. bias due to the introduction of new goods C. bias due to unmeasured quality change D. base year bias E. none of the above
A
Chapter 12 #1 A reasonable measure of the standard of living in a country is.. A. real GDP per person B. real GDP C. nominal GDP per person D. nominal GDP E. the growth rate of nominal GDP per person
A
Chapter 13 #12 Which of the following sets of government policies is the most growth oriented? A. lower taxes on the returns to saving, provide investment tax credits, and lower the deficit B. lower taxes on the returns to saving, provide investment tax credits, and increase the deficit C. increase taxes on the returns to saving, provide investment tax credits, lower the deficit D. increase taxes on the returns to saving, provide investment tax credits, increase the deficit
A
Chapter 13 #14 An increase in the budget deficit will.. A. raise the real interest rate and decrease the quantity of loanable funds demanded for investment B. raise the real interest rate and increase the quantity of loanable funds demanded C. lower the real interest rate and increase the quantity of loanable funds demanded D. lower the real interest rate and decrease the quantity of loanable funds demanded
A
Chapter 13 #16 An increase in the budget deficit is A. a decrease in the public saving B. an increase in the public saving C. a decrease in private saving D. an increase in private saving E. none of the above
A
Chapter 13 #4 National saving (or just saving) is equal to? A. private saving + public saving B. investment + consumption expenditures C. GDP-government purchases D. GDP+ consumption expenditures+government purchases E. none of the above
A
Chapter 16 #10 Which of the following policy actions by the Fed is likely to increase the money supply? A. reducing reserve requirements B. selling government bonds C. increasing the discount rate D. increase the interest on reserves E. all of these will increase the money supply
A
Chapter 16 #2 The M1 money supply is composed of A. currency, demand deposits, traveler's checks, and other checkable accounts B. currency, demand deposits, saving deposits, money market mutual funds, and small time deposits C. currency, government bonds, gold certificates and coins D. currency, NOW accounts, saving accounts, and government bonds E. none of the above
A
Chapter 17 #10 Velocity is.. A. the annual rate of turnover of the money supply B. the annual rate of turnover of output C. the annual rate of turnover of business inventories D. highly unstable E. imposible to measure
A
Chapter 17 #14 If the nominal interest rate is 6% and the inflation rate is 3% the real interest rate is A. 3% B. 6% C. 9% D. 18% E. none of the above
A
Chapter 17 #18 Suppose because of inflation people in Brazil economize on currency and go to the bank each day to withdraw their daily currency needs. This is an example of ? A. shoe leather costs B. menu costs C. costs due to inflation induced tax distortions D. costs due to inflation induced relative price variability which misallocates resources E. costs due to confusion and inconvenience
A
Chapter 17 #4 In the long run, the demand for money is most dependent upon.. A. the level of prices B. the availability of credit cards. C. the availability of banking outlets D. the interest rate
A
Chapter 18 #16 Suppose the money supply in Mexico grows more quickly than the money supply in the United States. We would expect that.. A. the peso should depreciate relative to the dollar B. the peso should appreciate relative to the dollar C. the peso should maintain a constant exchange rate with the dollar because of the purchasing power parity D. none of the above is true
A
Chapter 18 #18 Suppose a US resident buys a Jaguar automobile from Great Britain and the British exporter uses the receipts to buy stock in General Electric. Which of the following statements is true from the perspective of the United States? A. Net exports fall and net capital outflow falls B. net exports rise and net capital outflow rises C. net exports fall and net capital outflow rises D. net exports rise and net capital outflow falls E. none of the above is true
A
Chapter 2 #15 Which of the following statements about microeconomics and macroeconomics is not true? A. The study of very large industries is a topic within macroeconomics B. macroeconomics is concerned with economy wide phenomena C. microeconomics is a building block for macroeconomics D. Microeconomics and macroeconomics cannot be entirely separated.
A
Chapter 2 #7 Points of the production possibilities frontier are A. efficient B. inefficient C. unattainable D. normative E. none of the above
A
Chapter 20 #7 According to the wealth effect, aggregate demand slopes downward (negatively) because.. A. lower prices increase the value of money holdings and consumer spending increase B. lower prices decrease the value of money holdings and consumer spending decreases C. lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases D. lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls
A
Chapter 21 #11 An increase in the marginal propensity to consume (MPC) A. raises the value of the multiplier B. lowers the value of the multiplier C. has no impact on the value of he multiplier D. rarely occurs because the MPC is set by congressional legislation
A
Chapter 21 #16 When an increase in government purchases increases the income of some people, and those people spend some of that increase in income on additional consumer goods, we have seen a demonstration of A. the multiplier effect B. the investment accelerator C. the crowding out effect D. supply side economies E. none of the above
A
Chapter 21 #3 When the supply and demand for money are expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the price level.. A. shifts money demand to the right and increase the interest rate B. shifts money demand to the left and increase the interest rate C. shifts money demand to the right and decrease the interest rate D. shifts money demand to the left and decrease the interest rate E. does none of the above
A
Chapter 21 #5 In the market for real output, the initial effect of an increase in the money supply is to A. shift aggregate demand to the right B. shift aggregate demand to the left C. shift aggregate supply to the right D. shift aggregate supply to the left
A
Chapter 21 #7 The long run effect of an increase in the money supply is to A. increase the price level B. decrease the price level C. increase the interest rate D. decrease the interest rate
A
Chapter 22 #2 The original Phillips curve illustrates A. the trade off between inflation and unemployment B. the positive relationship between inflation and unemployment C. the trade off between output and unemployment D. the positive relationship between output and unemployment
A
Chapter 22 #7 An increase in expected inflation A. shifts the short run Phillips curve upward, and the unemployment inflation trade off is less favorable B. shifts the short run Phillips curve downward, and the unemployment inflation trade off is more favorable C. shifts the short run Phillips curve upward and the unemployment inflation trade off is more favorable D. shifts the short run Phillips curve downward and the unemployment inflation trade off is less favorable
A
Chapter 23 #3 Fluctuations in the economy caused by policymakers manipulation of the economy for the purpose of affecting electoral outcomes is known as the A. political business cycle B. time inconsistency of policy C. discretionary effect D. inflation targeting effect E. income effect
A
Chapter 23 #8 Which of the following is not an argument in support of using tax cuts to fight recessions? A. tax cuts have a more direct impact on aggregate demand than government spending B. tax cuts decentralize spending decisions by allowing households to spend on things they value C. tax cuts shift aggregate supply to the right relieving inflationary pressures D. tax cuts can provide incentives for the unemployed to find work and the employed to work longer hours
A
Chapter 3 #2 If a nation has a comparative advantage in the production of a good.. A. It can produce at a lower opportunity cost than its trading partners B. it can produce that good using fewer resources than its trading partner C. it can benefit by restricting imports of that good. D. it will specialize in the production of that good and export it E. none of the above
A
Chapter 4 #12 An increase (rightward shift) in the demand for a good will tend to cause A. an increase in the equilibrium price and quantity B. a decrease in the equilibrium price and quantity C. an increase in the equilibrium price and a decrease in the equilibrium quantity D. a decrease in the equilibrium price and a decrease in the equilibrium quantity E. none of the above
A
Chapter 4 #2 If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes then blue jeans and tennis shoes are? A. substitutes B. complements C. normal goods D. inferior goods E. none of the above
A
Chapter 4 #8 All of the following shift the supply of watches to the right except.. A. an increase in the price of watches B. an advance in the technology used to manufacture watches C. a decrease in the wage of workers employed to manufacture watches D. manufacturers' expectations of lower watch prices in the future E. all of the above cause an increase in the supply of watches
A
Chapter 6 #2 A binding price ceiling creates.. A. a shortage B. a surplus C. an equilibrium D. a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price
A
Chapter 12 #16 Which of the following government policies is least likely to increase growth in Africa? A. increase expenditures on public education B. increase restrictions on the importing of Japanese automobiles and electronics C. eliminate civil war D. reduce restrictions on foreign capital investment E. all of the above would increase growth
B
Chapter 12 #4 Once a country is wealthy.. A. it innerly impossible for it to become relatively poorer B. it may be harder for it to grow quickly because of the diminishing returns to capital C. capital becomes more productive due to the "catch up effect" D. it no longer needs any human capital E. none of the above
B
Chapter 12 #8 If a production function exhibits constant returns to scale, doubling all of the inputs A. has absolutely no impact on output because output is constant B. doubles output C. more than doubles output due to the catch up effect D. less than doubles output due to diminishing returns
B
Chapter 13 #10 Investment is.. A. the purchase of stocks and bonds B. the purchase of capital equipment and structures C. when we place our saving in the bank D. the purchase of goods and services
B
Chapter 13 #11 If Americans become more thrifty, we would expect A. the supply of loanable funds to shift to the right and the real interest rate to rise B. the supply of loanable funds to shift to the right and the real interest rate to fall C. the demand for loanable funds to shift to the right and the real interest rate to rise D. the demand for loanable funds to shift to the right and the real interest rate to fall
B
Chapter 13 #6 If government spending exceeds tax collections.. A. there is a budget surplus B. there is a budget deficit C. private saving is positive D. none of the above
B
Chapter 14 #11 Firm specific risk is the.. A. uncertainty associated with the entire economy B. uncertainty associated with specific companies C. risk associated with moral hazard D. risk associated with adverse selection
B
Chapter 14 #12 Diversification of a portfolio can.. A. reduce market risk B. reduce firm specific risk C. eliminate all risk D. increase the standard deviation of the portfolio's return
B
Chapter 14 #5 If two countries start with the same real GDP per person, and one country grows at 2% while the other grows at 4% A. one country will always have 2% more real GDP per person than the other B. the standard of living in the country growing at 4% will start to accelerate away from the slower growing country due to compound growth C. the standard of living in the two countries will converge D. next year the country growing at 4% will have twice the GDP per person as the country growing at 2%
B
Chapter 15 #20 If unemployment insurance were so generous that it paid laird off workers 95% of their regular salary.. A. the official unemployment rate would probably understate true unemployment B. the official unemployment rate would probably overstate the true unemployment C. there would be no impact on the official unemployment rate D. frictional unemployment would fall E. none of the above is true
B
Chapter 16 #13 The discount rate is A. the interest rate the Fed pays on reserves B. the interest rate the Fed charges on loans to banks C. the interest rate banks pay on the public's deposits D. the interest rate the public pays when borrowing from banks E. the interest rate paid by banks at the Term Auction Facility
B
Chapter 16 #3 An example of fiat money is A. gold B. paper dollars C. solid silver coins D. cigarettes in a prisoner of war camp
B
Chapter 16 #5 Commodity money A. has no intrinsic value B. has intrinsic value C. is used exclusively in the United States D. is used as reserves to back fiat money
B
Chapter 16 #9 If the reserve ratio is 25% the value of the money multiplier is A. 0.25 B. 4 C. 5 D. 25 E. none of the above
B
Chapter 17 #15 If actual inflation turns out to be greater than people had expected then... A. wealth was redistributed to lenders from borrowers B. wealth was redistributed to borrowers form lenders C. no redistribution ocurren D. the real interest rate is unaffected
B
Chapter 17 #17 Suppose that because of inflation a business is Russia must calculate print and mail a new price list to it customers each month. This is an example of? A. show leather costs B. menu costs C. costs due to inflation induced tax distortions D. arbitrary redistribution of wealth E. the Friedman rule
B
Chapter 17 #2 When prices rise at an extraordinarily high rate it is called A. inflation B. hyperinflation C. deflation D. hypoinflation C. disinflation
B
Chapter 17 #5 The quantity theory of money concludes that an increase in the money supply causes A. a proportional increase in velocity B. a proportional increase in prices C. a proportional increase in real output D. a proportional decrease in velocity E. a proportional decrease in prices
B
Chapter 17 #6 An example of a real variable is.. A. the nominal interest rate B. the ratio of the value of wages to the price of soda C. the price of corn D. the dollar wage E. none of the above
B
Chapter 17 #9 If the money supply grows 5% and real output grows 2% prices should rise by.. A. 5% B. less than 5% C. more than 5% D. none of the above
B
Chapter 18 #14 Suppose a cup of coffee is 1.5 euros in Germany and $0.50 in the United States. If purchasing power parity holds, what is the nominal exchange rate between euros and dollars? A. 1/3 euro per dollar B. 3 euros per dollar C. 1.5 euros per dollar D. 0.75 euro per dollar
B
Chapter 18 #3 Which of the following statements is true about a country with a trade deficit ? A. net capital outflow must be positive B. net exports are negative C. net exports are positive D. exports exceed imports E. none of the above is true
B
Chapter 18 #8 If the exchange rate changes from 3 Brazilian reals per dollar to 4 reals per dollar.. A. the dollar has depreciated B. the dollar as appreciated C. the dollar could have appreciated or depreciated depending on what happened to relative prices in Brazil and the United States D. none of the above is true
B
Chapter 20 #12 Suppose the economy is initially in the long run equilibrium. Then suppose there is a reduction in military spending due to the end of the Cold War. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run? A. prices rise; output is unchanged from its initial value B. prices fall; output is unchanged from its initial value C. output rises; prices are unchanged from the initial value D. output falls; prices are unchanged from the initial value E. output and the price level are unchanged from their initial values
B
Chapter 20 #13 Suppose the economy is initially in long run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run? A. prices rise; output rises B. prices rise; output falls C. prices fall; output falls D. prices fall; output rises
B
Chapter 20 #6 Which of the following statements is true regarding the long run aggregate supply curve? the long run aggregate supply curve.. A. shifts left when the natural rate of unemployment falls B. is vertical because an equal change in all prices and wages leaves output unaffected C. is positively sloped because price expectations and wages tend to be fixed in the long run D. shifts right when the government raises the minimum wage
B
Chapter 21 #1 Keynes's liquidity preferences theory of the interest rate suggests that the interest rate is determined by.. A. the supply and demand for loanable funds B. the supply and demand for money C. the supply and demand for labor D. aggregate supply and aggregate demand
B
Chapter 21 #10 If the marginal propensity to consume (MPC) is 0.75, the value of the multiplier is A. 0.75 B. 4 C. 5 D. 7.5 E. none of the above
B
Chapter 21 #14 Which of the following statements regarding taxes is correct? A. most economists believe that, in the short run, the greatest impact of a change in taxes in on aggregate supply, not aggregate demand B. a permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes C. an increase in taxes shifts the aggregate demand curve to the right D. a decrease in taxes shifts the aggregate supply curve to the left
B
Chapter 21 #17 When an increase in government purchases causes firms to purchase additional plant and equipment, we have seen a demonstration of A. the multiplier effect B. the investment accelerator C. the crowding out effect D. supply side economies E. none of the above
B
Chapter 22 #1 The misery index, which some commentators suggest measures the health of the economy, is A. the sum of the growth rate of output and the inflation rate B. the sum of the unemployment rate and the inflation rate C. the sum of the Dow Jones Industrial Average and the federal funds rate D. the sum of the national rate of unemployment and the actual rate of unemployment
B
Chapter 22 #18 If people have rational expectations, a monetary policy contraction that is announced and is credible could A. reduce inflation, but it would increase unemployment by an unusually large amount B. reduce inflation with little or no increase in unemployment C. increase inflation, but it would decrease unemployment by an unusually large amount D. increase inflation with little or no decrease in unemployment
B
Chapter 22 #6 According to the Phillips curve, in the short run, if policymakers choose an expansionary policy to lower the rate of unemployment A. the economy will experience a decrease in inflation B. the economy will experience an increase in inflation C. inflation will be unaffected if price expectations are unchanging D. none of the above is true
B
Chapter 22 #9 When actual inflation exceeds expected inflation A. unemployment is greater than the natural rate of unemployment B. unemployment is less than the natural rate of unemployment C. unemployment is equal to the natural rate of unemployment D. people will reduce their expectations of inflation in the future
B
Chapter 23 #14 Tax reform that encourages saving tends to A. shift the tax burden toward high income people away from low income people B. shift the tax burden toward low income people away from high income people C. reduce the rate of growth of output D. reduce the deficit
B
Chapter 23 #4 The discrepancy between policy announcements and policy actions is known as the A. political business cycle B. time inconsistency of policy C. discretionary effect D. substitution effect E. income effect
B
Chapter 23 #7 Economists who support a zero inflation target for monetary policy make all of the following arguments except.. A. even small levels of inflation impose permanent costs on the economy such as shoe leather costs and menu costs B. inflation erodes peoples incomes and zero inflation eliminates this problem C. the cost of reducing inflation to zero is temporary while the benefits are permanent D. the cost of reducing inflation to zero could be nearly eliminated if a zero inflation policy were credible
B
Chapter 3 #1 If a nation has an absolute advantage in the production of a good... A. it can produce that good at a lower opportunity cost than its trading partner B. it can produce that good using fewer resources than its trading partner C. it can benefit by restricting imports of that good. D. it will specialize in the production of that good and export it E. none of the above
B
Chapter 4 #9 If the price of a good is above the equilibrium price.. A. there is a surplus and the price will rise B. there is a surplus and the price will fall C. there is a shortage and the price will rise D. there is a shortage and the price will fall E. the quantity demanded is equal to the quantity supplied and the price remains the same
B
Chapter 6 #1 For a price ceiling to be a binding constraint on the market, the government must set it... A. above the equilibrium price B. below the equilibrium price C. precisely at the equilibrium price D. at any price because all price ceilings are binding constraints
B
Chapter 6 #4 A price floor... A. sets a legal maximum on the price at which a good can be sold B. sets a legal minimum on the price at which a good can be sold C. always determines the price at which a good must be sold D. is not a binding constraint if it is set above the equilibrium price
B
Chapter 14 #20 It is difficult for an actively managed mutual fund to outperform an index fund because A. index funds generally de better fundamental analysis B. stock markets tend to be inefficient C. actively managed funds trade more often and charge fees for their alleged expertise D. index funds are able to buy undervalued stocks E. all of the above are true
C
Chapter 15 #10 If, for any reason, the wage is held above the competitive equilibrium wage.. A. unions will likely strike, and the wage will fall to equilibrium B. The quality of workers in the applicant pool will tend to fall C. the quantity of labor supplied will exceed the quantity of labor demanded and there will be unemployment D. the quantity of labor demanded will exceed the quantity of labor supplied and there will be a labor shortage
C
Chapter 15 #2 According to the Bureau of Labor Statistics, a husband who chooses to stay home and take care of the household is... A. unemployed B. employed C. not in the labor force D. a discouraged worker
C
Chapter 15 #6 An accountant with a CPA designation who has been unable to find work for so long that she has stopped looking for work is considered to be... A. employed B. unemployed C. not in the labor force D. not in the adult population
C
Chapter 16 #1 Which of the following is not a function of money? A. unit of account B. store of value C. protection against inflation D. medium of exchange
C
Chapter 16 #12 A decrease in the reserve requirement causes.. A. reserves to rise B. reserves to fall C. the money multiplier to rise D. the money multiplier to fall E. none of the above
C
Chapter 16 #15 Suppose the Fed purchases a $1,000 government bond from you. If you deposit the entire $1,000 in your bank what is the total potential change in the money supply as a result of the Fed's action if the reserve requirements are 20%? A. $1,000 B. $4,000 C. $5,000 D. $0
C
Chapter 16 #8 Required reserves of banks are a fixed percentage of their.. A. loans B. assets C. deposits D. government bonds
C
Chapter 17 #1 In the long run, inflation is caused by A. banks that have market power and refuse to lend money B. governments that raise taxes so high that it increases the cost of doing business and hence raise prices C. governments that print too much money D. increase in the price of inputs such as labor and oil E. none of the above
C
Chapter 17 #13 Suppose the nominal interest rate is 7% while the money supply is growing at a rate of 5% per year. Assuming real output remains fixed, if the government increase the growth rate of the money supply from 5% to 9%, the Fisher effect suggest that in the long run the nominal interest rate should become.. A. 4% B. 9% C. 11% D. 12% E. 16%
C
Chapter 17 #7 The quantity equation states that A. money x price level= velocity x real output B. money x real output=velocity x price level C. money x velocity= price level x real output D. none of the above
C
Chapter 18 #17 When people take advantage of differences in prices for the same good by buying it where it is cheap and selling it where it is expensive, it is known as.. A. purchasing power parity B. net capital outflow C. arbitrage D. net exports E. currency appreciation
C
Chapter 18 #2 Each of the following is a reason why the US economy continues to engage is great amounts of international trade except which one.. A. there are larger cargo ships and airplanes B. High technology goods are more valuable per pound and this more likely to be traded C. NAFTA imposes requirements for increase trade between countries in North America D. there have been improvements in technology that have improved telecommunications between countries E. all of the above are reasons for increased trade by the United States
C
Chapter 18 #6 If Japan exports more than it imports.. A. Japan's net exports are negative B. Japan's net capital outflow must be negative C. Japan's net capital outflow must be positive D. Japan is running a trade deficit
C
Chapter 2 #16 Which of the following statements is normative? A. printing too much money causes inflation B. People work harder if the wage is higher C. the unemployment rate should be lower D. large government deficits cause an economy to grow more slowly
C
Chapter 2 #8 Which of the following will not shift a country's production possibilities frontier outward? A. an increase in the capital stock B. an advance in technology C. a reduction in unemployment D. an increase in the labor force
C
Chapter 20 #10 Suppose the price level falls but suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production. This is a demonstration of the.. A. sticky wage theory of the short run aggregate supply curve B. sticky price theory of the short run aggregate supply curve C. misperceptions theory of the short run aggregate supply curve D. classical dichotomy theory of the short run aggregate supply curve
C
Chapter 20 #11 Suppose the economy is initially in the long run equilibrium. Then suppose there is a reduction in military spending due to the end of the Cold War. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run? A. prices rise; output rises B. prices rise; output falls C. prices fall; output falls D. prices fall; output rises
C
Chapter 20 #16 Which of the following events shifts the short run aggregate supply curve to the right? A. an increase in government spending on military equipment B. an increase in price expectations C. a drop in oil prices D. a decrease in the money supply E. none of the above
C
Chapter 20 #19 According to the model of aggregate supply and aggregate demand, in the long run an increase in the money supply should cause.. A. prices to rise and output to rise B. prices to fall and output to fall C. prices to rise and output to remain unchanged D. prices to fall and output to remain unchanged
C
Chapter 20 #4 Which of the following is not a reason why the aggregate demand curve slopes downward? A. the wealth effect B. the interest rate effect C. the classical dichotomy/ monetary neutrality effects D. exchange rate effect E. all of the above are reasons why the aggregate demand curve slopes downward
C
Chapter 20 #5 In the model of aggregate demand and aggregate supply the initial impact of an increase in consumer optimism is to... A. shift short run aggregate supply to the right B. shift short run aggregate supply to the left C. shift aggregate demand to the right D. shift aggregate demand to the left E. shift long run aggregate supply to the left
C
Chapter 21 #13 When an increase in government purchases raises incomes, shifts money demand to the right, raises interest rate, and lowers investment, we have seen a demonstration of A. the multiplier effect B. the investment accelerator C. the crowding out effect D. supply side economics e. the liquidity trap
C
Chapter 21 #15 Suppose the government increases its purchases by $16 billion. If the multiplier effects exceeds the crowding out effect, then A. the aggregate supply curve shifts to the right by more than $16 billion B. the aggregate supply curve shifts to the left by more than $16 billion C. the aggregate demand curve shifts to the right by more than $16 billion D. the aggregate demand curve shifts to the left by more then $16 billion
C
Chapter 21 #18 Which of the following is an automatic stabilizer A. military spending B. spending on public schools C. unemployment benefits D. spending on the space shuttle E. all of the above
C
Chapter 21 #8 Suppose a wave of investor and customer pessimism causes a reduction in spending. If the Federal Reserve chooses to engage in activist stabilization policy, it should.. A. increase government spending and decrease taxes B. decrease government spending and increase taxes C. increase the money supply and decrease interest rates D. decrease the money supply and increase interest rates
C
Chapter 21 #9 The initial impact of an increase in government spending is to shift A. aggregate supply to the right B. aggregate supply to the left C. aggregate demand to the right D. aggregate demand to the left
C
Chapter 22 #10 A decrease in the price of foreign oil A. shifts the short run Phillips curve upward, and the unemployment inflation trade off is less favorable B. shifts the short run Phillips curve downward, and the unemployment inflation trade off is more favorable C. shifts the short run Phillips curve upward and the unemployment inflation trade off is more favorable D. shifts the short run Phillips curve downward and the unemployment inflation trade off is less favorable
C
Chapter 22 #20 If the Fed were to continuously use expansionary monetary policy in an attempt to hold unemployment below the natural rate the long run result would be A. an increase in the level of output B. a decrease in the unemployment rate C. an increase in the rate of inflation D. all of the above
C
Chapter 22 #4 Along a short run Phillips Curve A. a higher rate of growth in output is associated with a lower unemployment rate B. a higher rate of growth in output is associated with a higher unemployment rate C. a higher rate of inflation is associated with a lower unemployment rate D. a higher rate of inflation is associated with a higher unemployment rate
C
Chapter 22 #5 If, in the long run, people adjust their price expectations so that all prices and incomes move proportionately to an increase in the price level, then the long run Phillips curve A. is positively sloped B. is negatively sloped C. is vertical D. has a slope that is determined by how fast people adjust their price expectations
C
Chapter 23 #2 Economists who argue that policymakers should not try to stabilize the economy make all of the following arguments except? A. Since stabilization policy affects the economy with a lag, well intended policy could be destabilizing B. Since forecasting shocks to the economy is difficult, well intended policy could be destabilizing C. Stabilization policy has no effect on the economy in the short run or the long run D. the first rule of policymaking should be "do no harm"
C
Chapter 23 #5 Economists who argue that monetary policy should be made by a rule make all of the following arguments except.. A. a policy rule limits the incompetence of policymakers B. a policy rule limits the abuse of power of policymakers C. a policy rule is more flexible than discretionary policy D. a policy rule eliminates the time inconsistency problem
C
Chapter 23 #9 Which of the following is not true with the regard to government budget deficits? A. budget deficits place the burden of current spending on future tax payers B. budget deficits reduce national saving C. budget deficits should be scrutinized because they are the only way to transfer wealth across generations of taxpayers D. budget deficits reduce capital investment, future productivity and therefore future incomes
C
Chapter 3 #5 Which of the following statements is true? A. Self-sufficiency is the road to prosperity for most countries B. A self sufficient country consumes outside its production possibilities frontier C. A self sufficient country at best can consume on it production possibilities frontier D. Only countries with an absolute advantage in the production of every good should strive to be self sufficient.
C
Chapter 4 #10 If the price of a good is below the equilibrium price.. A. there is a surplus and the price will rise B. there is a surplus and the price will fall C. there is a shortage and the price will rise D. there is a shortage and the price will fall E. the quantity demanded is equal to the quantity supplied and the price remains the same
C
Chapter 4 #13 A decrease (leftward shift) in the supply for a good will tend to cause... A. an increase in the equilibrium price and quantity B. a decrease in the equilibrium price and quantity C. an increase in the equilibrium price and a decrease in the equilibrium quantity D. a decrease in the equilibrium price and a decrease in the equilibrium quantity E. none of the above
C
Chapter 4 #7 Which of the following shifts the demand for watches to the right? A. a decrease in the price of watches B. a decrease in consumer incomes if watches are a normal good C. a decrease in the price of watch batteries if watch batteries and watches are complements D. an increase in the price of watches E. none of the above
C
Chapter 6 #6 Which side of the market is more likely to lobby government for a price floor? A. neither buyers nor sellers desire a price floor B. both buyers and sellers desire a price floor C. the sellers D. the buyers
C
Chapter 10 #7 If nominal GDP in 2013 exceeds nominal GDP in 2012, then the production of output must have.. A. risen B. fallen C. stayed the same D. risen or fallen because there is not enough information to determine what happened to real output
D
Chapter 10 #9 GDP would include which of the following? A. housework B. illegal drug sales C. intermediate sales D. consulting services E. the value of taking a day off work
D
Chapter 11 #4 Which of the following would likely cause the CPI to rise more than the GDP deflator? A. an increase in the price of fords B. an increase in the price of tanks purchased by the military C. an increase in the price of domestically produced fighter planes sold exclusively to Israel D. an increase in the price of Hondas produced in Japan and sold in the United Staes E. an increase in the price of John Deere tractors
D
Chapter 12 #14 Our standard of living is most closely related to A. how hard we work B. our supply of capital because everything of value is produced by machinery C. our supply of natural resources because they limit production D. our productivity because our income is equal to what we produce
D
Chapter 12 #7 Which of the following statements is true? A. Countries may have a different level of GDP per person but they will all grow at the same rate B. Countries may have a different growth rate by they all have the same level of GDP per person C. countries all have the same growth rate and level of output because any country can obtain the same factors of production D. countries have great variance in both the level and growth rate of GDP per person; thus poor countries can become relatively rich over time.
D
Chapter 13 #20 An increase in the budget surplus.. A. shifts the demand for loanable funds to the right and increase the real interest rate B. shifts the demand for loanable funds to the left and reduces the real interest rate C. shifts the supply of loanable funds to the left and increases the real interest rate D. shifts the supply of loanable funds to the right and reduces the real interest rate
D
Chapter 13 #3 A financial intermediary is a middle person between A. labor unions and firms B. husbands and wives C. buyers and sellers D. borrowers and lenders
D
Chapter 14 #6 Using the rule of 70, if your income grows at 10% per year, your income will double in approximately... A. 700 years B. 70 years C. 7 years D. There is not enough information to answer this question
D
Chapter 15 #1 The amount of unemployment that the economy normally experiences is known as A. efficiency wage unemployment B. frictional unemployment C. cyclical unemployment D. the natural rate of unemployment
D
Chapter 15 #12 Which of the following government policies would fail to lower the unemployment rate? A. reduce the unemployment benefits B. establish employment agencies C. establish worker training programs D. raise the minimum wage E. establish right to work laws
D
Chapter 15 #17 Which of the following statements about efficiency wage theory is true? A. firms do not have a choice about whether they pay efficiency wages of not because these wages are determined by law B. paying lowest possible wage is always the most efficient (profitable) C. Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities D. Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort
D
Chapter 15 #19 Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium? A. unemployment due to minimum wage laws B. unemployment due to unions C. unemployment due to efficiency wages D. frictional unemployment
D
Chapter 16 # 14 Which of the following policy combinations would consistently work to increase the money supply? A. sell government bonds, decrease reserve requirements, decrease the discount rate B. sell government bonds, increase reserve requirements, increase the discount rate C. buy government bonds, increase reserve requirements, decrease the discount rate D. buy government bonds, decrease reserve requirements, decrease the discount rate E. none of the above
D
Chapter 16 #11 Suppose Joe changes his $1,000 demand deposit from Bank A to Bank B. If the reserve requirement is 10%, what is the potential change in demand deposits as a result of Joe's action? A. $1,000 B. $9,000 C.$10,000 D. $0
D
Chapter 16 #6 To insulate the Federal Reserve from political pressure A. the Board of Governors are elected by the public B. the Board of Governors have lifetime tenure C. the Board of Governors are supervised by the House Banking Committee D. the Board of Governors are appointed to 14 year terms
D
Chapter 17 #3 If the price level doubles.. A. the quantity demanded of money falls by half B. the money supply has been cut by half C. nominal income is unaffected D. the value of money has been cut by half E. none of the above
D
Chapter 17 #8 If money is neutral.. A. an increase in the money supply does nothing B. the money supply cannot be changed because it is tied to a commodity such as gold C. a change in the money supply only affects real variables such as real output D. a change in the money supply only affects nominal variables such as prices and dollar wages E. a change in the money supply reduces velocity proportionately therefore there is no effect on either prices or real output
D
Chapter 18 #13 Which of the following people or firms would be pleased by a depreciation of the dollar? A. a US tourist traveling in Europe B. a US importer of Russian vodka C. a French exporter of wine to the United States D. an Italian importer of US steel E. a Saudi Arabian prince exporting oil to the United States
D
Chapter 18 #15 Which of the following products would likely be the lease accurate if used to calculate purchasing power parity? A. gold B. automobiles C. diamonds D. dental services
D
Chapter 18 #9 Suppose the real exchange rate between Russia and the United States is defined in terms of bottles of Russian vodka per bottle of US vodka. Which of the following will increase the real exchange rate (that is increase the number of bottles of Russian vodka per bottle of US vodka)? A. a decrease in the ruble price of Russian vodka B. an increase in the dollar price of US vodka C. an increase in the number of rubles for which the dollar can be exchanged D. all of the above will increase the real exchange rate E. none of the above will increase the real exchange rate
D
Chapter 2 #14 Which of the following issues is related to microeconomics? A. the impact of money on inflation B. the impact of technology on economic growth C. the impact of the deficit on saving D. the impact of oil prices on auto production
D
Chapter 2 #18 Positive statements are A. microeconomic B. macroeconomic C. statements of prescription that involve value judgements D. Statements of description that can be tested.
D
Chapter 2 #6 Which of the following is not a factor of production? A. land B. labor C. capital D. money E. all of the above are factors of production
D
Chapter 20 #1 Which of the following statements about economic fluctuations is true? A. a recession is when output rises above the natural level of output B. a depression is mild recession C. economic fluctuations have been termed the "business cycle" because the movements in output are regular are predictable D. a variety of spending, income, and output measures can be used to measure E. None of the above is true
D
Chapter 20 #15 Stagflation occurs when the economy experiences.. A. falling prices and falling output B. falling prices and rising output C. rising prices and rising output D. rising prices and falling output
D
Chapter 20 #3 Which of the following would not cause a shift in the long run aggregate supply curve? A. an increase in the available labor B. an increase in the available capital C. an increase in the available technology D. an increase in price expectations E. all of the above shift the long run aggregate supply curve
D
Chapter 20 #8 The natural level of output in the amount of real GDP produced.. A. when there is no unemployment B. when the economy is at the natural level of investment C. when the economy is at the natural level of aggregate demand D. when the economy is at the natural rate of unemployment
D
Chapter 21 #12 Suppose a wave of investor and consumer optimism has increased spending so that the current level of output exceeds the long run natural rate. If policy makers choose to engage in activist stabilization policy, they should.. A. decrease taxes, which shifts aggregate demand to the right B. decrease taxes, which shifts aggregate demand to the left C. decrease government spending, which shifts aggregate demand to the right D. decrease government spending which shifts aggregate demand to the left
D
Chapter 21 #4 For the United States, the most important source of the downward drop of the aggregate demand curve is A. the exchange rate effect B. the wealth effect C. the fiscal effect D. the interest rate effect E. none of the above
D
Chapter 21 #6 The initial effect of an increase in the money supply is to A. increase the price level B. decrease the price level C. increase the interest rate D. decrease the interest rate
D
Chapter 22 #11 The natural rate hypothesis argues that A. unemployment is always above the natural rate B. unemployment is always below the natural rate C. unemployment is always equal to the natural rate D. in the long run the unemployment rate returns to the natural rate, regardless of inflation
D
Chapter 22 #3 The Phillips Curve is an extension of the model of aggregate supply and aggregate demand because, in short run, an increase in aggregate demand increases price and.. A. decreases growth B. decrease inflation C. increase unemployment D. decrease unemployment
D
Chapter 22 #8 Which of the following would shift the long run Phillips curve to the right A. an increase in the price of foreign oil B. an increase in expected inflation C. an increase in aggregate demand D. an increase in the minimum wage
D
Chapter 23 #1 Suppose that the economy is suffering from pessimism on the part of consumers and firms. Which of the following is an activist stabilization policy that "leans against the wind"? A. policymakers should decrease the money supply B. policymakers should increase taxes C. policymakers should decrease government spending D. policymakers should decrease interest rates E. none of the above is true
D
Chapter 23 #6 Which of the following is an example of a discretionary policy action that further destabilizes the economy A. Investors become pessimistic, and the FD responds with a reduction in interest rates B. Consumers become pessimistic, and fiscal policymakers respond with a reduction in taxes C. investors become excessively optimistic and the Fed responds with a reduction in the money supply D. consumers become pessimistic and fiscal policymakers respond with a reduction in government spending
D
Chapter 3 #3 Which of the following statements about trade is true? A. Unrestricted international trade benefits every person in a country equally B. People who are skilled at all activities cannot benefit from trade C. Trade can benefit everyone in a society because it allows people to specialize in activities in which they have an absolute advantage D. Trade benefits everyone in a society because it allows people to specialize in activities in which they have a comparative advantage
D
Chapter 3 #4 According to the principle of comparative advantage.. A. countries with a comparative advantage in the production of every good need not specialize B. Countries should specialize in goods they enjoy consuming C. Countries should specialize in the production of goods for which they use fewer resources in production then their trading partners D. Countries should specialize in the production of goods which they have a lower opportunity cost than their trading partners
D
Chapter 4 #20 An inferior good is one for which an increase in income causes a(n)... A. increase in supply B. decrease in supply C. increase in demand D. decrease demand
D
Chapter 6 #3 Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result? A. there will be a shortage of housing B. landlords may discriminate among apartment renters C. landlords may be offered bribes to rent apartments D. the quality of apartments will improve E. There may be long lines of buyers waiting for apartments
D
Chapter 6 #5 Which of the following statements about a binding price ceiling is true? A. the surplus created by the price ceiling is greater in the short run than in the long run B. the surplus created by the price ceiling is greater in the long run than in the short run C. the shortage created by the price ceiling is greater in short run than the long run D. the shortage created by the price ceiling is greater in the long run than the short run
D
Chapter 6 #9 Which of the following statements is true if the government places a price ceiling on gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon? A. there will be a shortage of gasoline B. there will be a surplus of gasoline C. A significant increase in the supply of gasoline could cause the price ceiling to become a binding constraint D. A significant increase in the demand of gasoline could cause the price ceiling to become a binding constraint
D
Chapter 1 #1 Which of the following involve a trade-off? A. Buying a new car B. Going to college C. Watching a football game on Saturday afternoon D. Taking a nap E. All of the above
E
Chapter 10 #1 An example of a transfer payment is A. wages B. profit C. rent D. government purchases E. unemployment benefits
E
Chapter 10 #6 Gross domestic product is the sum of the market value of the.. A. intermediate goods B. manufactured goods C. normal goods and services D. inferior goods and services E. final goods and services
E
Chapter 14 #7 Using the rule of 70, if your parents place $10,000 in a deposit for you on the day you are born, approximately how much will be in the account when you retire at 70 years old if the deposit earns 3% per year A. $300 B. $3,000 C. $20,000 D. $70,000 E. $80,000
E
Chapter 18 #1 An economy that interacts with other economies is known as A. a balanced trade economy B. an export economy C. an import economy D. a closed economy E. an open economy
E
Chapter 18 #10 The most accurate measure of the international value of the dollar is A. the yen/dollar exchange rate B. the Brazilian real/ dollar exchange rate C. the peso/ dollar exchange rate D. the British pound/ dollar exchange rate E. an exchange rate index that accounts for many exchange rates
E
Chapter 18 #7 If the United States saves $1,000 billion and US net capital outflow is -$200 billion US domestic investment is? A. -$200 billion B. $200 billion C. $800 billion D. $1,000 billion E. $1,200 billion
E
Chapter 20 #14 Suppose the economy is initially in long run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. If policy makers allow the economy to adjust to long run equilibrium on its own according to the model of aggregate demand and aggregate supply what happens to prices and output in the long run? A. prices rise; output is unchanged from its initial value B. prices fall; output is unchanged from its initial value C. output rises; prices are unchanged from the initial value D. output falls; prices are unchanged from the initial value E. output and the price level are unchanged from their initial values
E
Chapter 23 #12 Which of the following changes to tax laws would encourage more saving but also increase the tax burden on low income people? A. reduce taxes on the return to saving B. remove the double taxation on capital income from stocks C. reduce inheritance taxes D. replace the income tax with a consumption tax E. all of the above
E
Chapter 4 #11 If the price of a good is equal to the equilibrium price... A. there is a surplus and the price will rise B. there is a surplus and the price will fall C. there is a shortage and the price will rise D. there is a shortage and the price will fall E. the quantity demanded is equal to the quantity supplied and the price remains the same
E
Chapter 20 #20 Policy makers are said to "accommodate" and adverse supply shock if they A. respond to the adverse supply shock by increasing aggregate demand which further raises prices B. respond to the adverse supply shock by decreasing aggregate demand which lowers prices C. respond to the adverse supply shock by decreasing short run aggregate supply. D. fail to respond to the adverse supply shock and allow the economy to adjust on its own
a