Macro Final Multiple Choice

Which of the following would help explain why the aggregate demand curve slopes downward? A.) An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. B.) A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. C.) A higher price level increases real wealth, which stimulates spending consumption. D.) A lower price level reduces the interest rate, which encourages greater spending on investment goods.

A lower price level reduces the interest rate, which encourages greater spending on investment goods.

The term hyperinflation refers 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.

A period of very high inflation.

Suppose Sam can plow snow from three parking lots per hour or he can shovel six driveways per hour. Paul can plow snow from two parking lots per hour or he can shovel five driveways per hour. A.) Sam has an absolute advantage over Paul in plowing parking lots. B.) Sam has a competitive advantage over Paul in plowing parking lots. C.) Paul has a comparative advantage over Sam in shoveling driveways. D.) All of the above are correct.

All of the above are correct.

Given that a country's real output has increased, in which of the following cases can we be sure that its productivity also has increased? A.) The total number of hours worked rose. B.) The total number of hours worked stayed the same. C.) The total number of hours worked fell. D.) Both A and B are correct. E.) Both B and C are correct. F.) Both A and C are correct. G.) All of the A, B, and C are correct.

Both B and C are correct.

If the cross-price elasticity of two goods is negative, then the two goods are: A.) Substitutes. B.) Complements. C.) Normal goods. D.) Inferior goods. E.) Necessities. F.) Luxuries.

Complements.

If the government imposes a binding price ceiling in a market, then the price paid by buyers will: A.) Decrease, and the quantity sold in the market will increase. B.) Decrease, and the quantity sold in the market will decrease. C.) Increase, and the quantity sold in the market will increase. D.) Increase, and the quantity sold in the market will decrease.

Decrease, and the quantity sold in the market will decrease.

When inflation rises, people will: A.) Demand more money so the price level rises. B.) Demand more money so the price level falls. C.) Demand less money so the price level rises. D.) Demand less money so the price level falls.

Demand more money so the price level rises.

Most economists believe that money neutrality: A.) Does not hold up in the short run. B.) Does not hold in the long run. C.) Does not hold in either the short run or long run. D.) Holds in the short run and the long run.

Does not hold up in the short run.

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $100 worth of bonds, what happens to the money supply? A.) It increases by $2,500. B.) It increases by $2,000. C.) It decreases by $2,500. D.) It decreases by $2,000.

It decreases by $2,500.

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes: A.) M1 increases by $2,500 and M2 decreases by $2,500. B.) M1 increases by $2,500 and M2 stays the same. C.) M1 and M2 stay the same. D.) M1 decreases by $2,500, and M2 increases by $2,500.

M1 increases by $2,500 and M2 stays the same.

Which of the following would shift the supply of New England Patriots football jerseys to the left? A.) The Patriots Won the Superbowl!!! :D B.) Price of the jerseys increased by 15 dollars. C.) The cost of the fabric used to make the jerseys increased. D.) The technology of showing machines used to make the jerseys improves.

The cost of the fabric used to make the jerseys increased.

The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land, in the long run... A.) The supply of money decreases and Mainland will suffer from inflation. B.) The supply of money increases and Mainland will suffer from inflation. C.) The supply of money decreases and Mainland will suffer from deflation. D.) The supply of money increases and Mainland will suffer from deflation. E.) The demand of money increases and Mainland will suffer from inflation. F.) The demand for money decreases and Mainland will suffer from deflation.

The supply of money increases and Mainland will suffer from inflation.

Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, then: A.) Both the unemployment rate and labor-force participation rate would be higher. B.) Both the unemployment rate and labor-force participation rate would be lower. C.) The unemployment rate would be higher, and the labor-force participation rate would be higher. D.) The unemployment rate would be lower, and the labor-force participation rate would be unaffected.

The unemployment rate would be lower, and the labor-force participation rate would be unaffected.

For a particular good, an 8 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? A.) There are no close substitutes for this good. B.) The good is a necessity. C.) The market for the good is broadly defined. D.) The relevant time horizon is long.

There are no close substitutes for this good.

Janet is a farmer. Which of the following are included in her human capital? A.) Her tractor and what she's learned from experience. B.) Her tractor but not what she's learned from experience. C.) What she's learned from experience, but not her tractor. D.) The value of her farm but neither her tractor nor what she's learned from experience.

What she's learned from experience, but not her tractor.