Unformatted Document Excerpt
Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.
Course Hero has millions of student submitted documents similar to the one below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.
bond A is a b. certificate of indebtedness.
A closed economy does not a. trade with other economies.
A country with a relatively low level of real GDP per person is considering adopting d. neither the first nor the second
A decrease in the price of domestically produced industrial robots will be reflected in c. the GDP deflator but not in the consumer price index.
A leading environmental group recently published a report contending that humans c. disagree with the report, in part because it ignores the mitigating effects of
A management professor discovers a way for corporate management to operate more efficientlyd. common, but not proprietary, knowledge.
A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 4 percentd. $50.00.
A person who is not employed and claims to be trying hard b. is counted as unemployed but should be counted as out of the labor force
A problem that the Fed faces when it attempts to control the money supply is that d. the Fed does not control the amount of money that households choose to hold as
deposits in banks.
A risk-averse person has d. a utility curve that slopes upward and a marginal utility curve that slopes downward.
A risk-averse person has b. a utility function whose slope gets flatter as wealth rises. This means they have diminishing marginal utility of wealth.
According to the classical dichotomy, when the money supply doubles which of the following doubles? a. the price level and nominal GDP
According to the principle of monetary neutrality, a decrease in the money supply will not change c. unemployment.
According to 2007 data on the U.S. population, which of the following groups c. black males
According to the rule of 70, if the interest rate is 10 percent, about how long will it take for the value of a savings account to double? b. about 7 years
According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would c. lower private saving and raise public saving.
According to the quantity equation, if P = 2, Y = 6,000, and M = 3,000, then V = c. 4
According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if b. either a rise in output or a fall in velocity.
Adelina owns her own business. Odilon is an unpaid worker in his familys business. Who is included in the Bureau of Labor Statistics c. both Adelina and Odilon
After a corporation issues stock, the stock d. None of the above are correct.
All else equal, which of the following would tend to cause real GDP per person to rise? b. an increase in investment in human capital
An organization that tries to encourage the flow of investment to poor countries is the a. World Bank
An economys production function has the constant-returns-to-scale property d. increase, but not necessarily by either 50 percent or 100 percent.
An increase in the minimum wage would d. decrease the quantity of labor demanded but increase the quantity of labor supplied
An increase in the number of corporations in a portfolio from 110 to 120 reduces d. firm-specific risk by less than an increase from 1 to 10.
An increase in the number of corporations in a portfolio from 1 to 10 reduces c. firm-specific risk by more than an increase from 110 to 120.
An increase in the price of dairy products produced domestically will be reflected in a. both the GDP deflator and the consumer price index.
Angela reads financial advice columns and concludes the following. Which, if any, of her conclusions are incorrect? b. People who are risk averse should never hold stock.
Anna deposited $10,000 into an account three years ago. The first year she earned 12 percent interest,a. $12,579.84
As a money management fee, mutual funds usually charge their customers a. between 0.5 and 2.0 percent of assets each year.
As the number of stocks in a portfolio rises, b. firm-specific risks fall; market risk does not.
As the number of stocks in a persons portfolio increases, d. the risk of the portfolio decreases, as indicated by the decreasing value of the standard deviation of the
At which interest rate is the present value of $135.20 two years from today equal to $125 today? b. 4 percent
Based on past experience, if a country is experiencing hyperinflation, then d. All of the above are correct.
Between 1880 and 1886, prices that were b. lower than expected transferred wealth from debtors to creditors.
Buskins Corporation has issued 2 million shares of stock. Its earnings were $10 million, a. $2.
Cedar Valley Furniture uses 5 workers, each working 8 hours, to produce 80 rocking chairs a. 2 chairs per hour
Charlie is the owner of a firm that produces bottled water in Washington state a. The higher the wage, the less often his workers will choose to leave his firm
Consider two people who are currently out of work. Tim is not looking for work because there have been many job cuts where he lives and he doesn't think it likely that he will
find work a. both Tim and Bev to be marginally attached workers.
Countries that grew the fastest over the last 100 or so years had growth rates of real income per person of about d. 2.5 percent per year.
Countries that have lower levels of real GDP per person than the United States d. in some cases have growth rates that are higher than that of the United States and in
other cases lower than that of the United States.
Country A has a population of 1,000, of whom 700 worked an average of 8 hours b. country A, and the country with higher real GDP per person was country B.
Currently, U.S. currency is b. fiat money with no intrinsic value.
Cyclical unemployment refers to c. year-to-year fluctuations of unemployment around its natural rate.
Data on the unemployment rate in the U.S. since 1960 show that the economy c. always has some unemployment and that the amount changes from year to year.
During the past century the average growth rate of U.S. real GDP per person implies that it doubled, on average, about every c. 35 years.
During the stock market crash of October 1987, the Fed d. prevented a financial panic by providing liquidity to the financial system.
Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth? c. nutrition
Economists have developed models of risk aversion using the concept of a. utility and the associated assumption of diminishing marginal utility.
Ethel purchased a bag of groceries in 1970 for $8 d. $37.11
Evidence from research studies by economists a. shows that increased unemployment benefits decrease the job search efforts of the unemployed.
Refer to Figure 25-1. The shape of the curve is consistent with which of the following statements about the economy to which d. All of the above are correct.
Refer to Figure 26-3. Which of the following movements shows the effects of the government going from a budget deficit to a b. a movement from Point B to Point A
Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2? b. Firms become optimistic about the future and, as a result, they plan
to increase their purchases of new equipment and construction of new factories.
Refer to Figure 26-3. What, specifically, does the label on the vertical axis, i, represent? b. the real interest rate
Refer to Figure 26-3. Which of the following movements shows the effects of a new law that makes more people than before c. a movement from Point C to Point F
Refer to Figure 27-1. Which distance along the vertical axis represents the marginal utility of an increase from $600 to $800? d. the distance between point B and point C
Refer to Figure 27-1. Suppose the person to whom this utility function applies begins with $600 in wealth. Starting from there, c. the pain of losing $200 of her wealth would
equal the pleasure of adding $200 to her wealth.
Refer to Figure 27-1. Suppose the person to whom this utility function applies begins with $600 in wealth. Starting from there, a. she would be willing to accept a coin-flip
bet that would result in her winning $200 if the result was heads or losing $200 if the result was tails. OR c. the pain of losing $200 of her wealth would exceed the
pleasure of adding $200 to her wealth.
Refer to Figure 27-2. Which of the following statements is correct? d. The figure shows that the greater the risk, the greater the return.
Refer to Figure 27-2. Point A represents a situation in which d. All of the above are correct.
Refer to Figure 28-1. At the equilibrium wage, how many workers are employed? c. 5000
Refer to Figure 28-1. If the government imposes a minimum wage of $4, then how many workers will be employed? c. 5000
Refer to Figure 28-1. If the government imposes a minimum wage of $8, then how many workers will be unemployed? c. 4000
Refer to Figure 30-3. If the relevant money-supply curve is the one labeled MS2, then a. when the money market is in equilibrium, one dollar purchases about one-third of
a basket of goods and services
Financial intermediaries are d. financial institutions through which savers can indirectly provide funds to borrowers.
Financial intermediaries are d. financial institutions through which savers can indirectly provide funds to borrowers
For a given year, productivity in a particular country is most closely matched with that country's b. level of real GDP divided by hours worked over that year.
For an imaginary economy, the value of the consumer price index was 125 in 2009, and the inflation rate was 4.8 percent between 2008 and 2009 a. 119.27.
For the Bureau of Labor Statistics to place someone in the unemployed category, that person must d. None of the above is correct.
Four years ago Lenny deposited some money into an account. He earned 5 percent interest on this account and now it has a balance of $303.88. About how much money did
Lenny deposit into his account when he opened it? d. $250
Fortunade Corporation stock has a price of $100 per share, a dividend of $1.60 per share, and retained earnings of $2.00 per share. The dividend yield c. 1.6 percent.
From 2004 to 2005, the CPI for medical care increased from 260.8 to 272.8. What was the inflation rate for medical care? b. 4.6 percent
From the standpoint of the economy as a whole, the role of insurance is c. not to eliminate the risks inherent in life, but to spread them around more efficiently.
From time to time, the demand for workers has risen in one region of the United States and fallen in another c. frictional unemployment created by sectoral shifts.
Fundamental analysis is c. the study of a companys accounting statements and future prospects to determine its value.
Fundamental analysis shows that Green Leaf Tea Company is fairly valued d. Fundamental analysis would now show the corporation is undervalued. The fact that the
price was unchanged is not consistent with the efficient markets hypothesis.
Fundamental analysis shows that stock in Cedar Valley Furniture Corporation has a price that exceeds its present value. b. This stock is overvalued; you shouldn't consider
adding it to your portfolio.
Given that a countrys real output has increased, in which of the following cases can we be sure that its productivity also has increased? d. Both b and c are correct.
Given that Isabella is a risk-averse person, she might accept a bet with a 50 percent chance of losing $100 today if she had a 50 percent c. chance of winning $110 in two years
and the interest rate was 3%.
Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary b. $46,666.67.
Historically, the typical price-earnings ratio for stocks is about c. 15
Human capital is d. knowledge and skills that workers have acquired.
If a country's saving rate increases, then in the long run c. productivity and real GDP per person are both higher.
If a country were to increase its saving rate, then in the long run it would also increase its a. level of income.
If a country were to increase its saving rate, then in the long run it would also increase its a. level of income.
If Congress reduced the tax rate on interest income, investment c. and saving would increase.
If Proctor and Gamble sells a bond it is a. borrowing directly from the public.
If the budget deficit increases then c. saving falls and the interest rate rises
If the consumer price index was 80 in 2004, 100 in 2005, and 110 in 2006, then the base year must be b. 2005
If the cost of apparel increases by 50 percent, then, other things the same, the CPI is likely to increase by about b. 2 percent.
If the cost of food & beverages increases by 20 percent, then, other things the same, the CPI is likely to increase by about a. 3 percent.
If the demand for loanable funds shifts to the left, then the equilibrium interest rate b. and quantity of loanable funds fall.
If the Fed makes open market purchases of bonds, a. the money supply increases by more than the amount of bonds purchased.
If the nominal interest rate is 7.5 percent and the rate of inflation is -2.5 percent, then the real interest rate is d. 10 percent.
If the quality of a good improves while its price remains the same, then the value of a dollar b. rises and the cost of living decreases.
If the efficient market hypothesis is correct, then a. index funds should typically beat managed funds, and usually do.
If the interest rate is r percent, then the rule of 70 says that your savings will double about every c. 70/r years.
If the reserve ratio for all banks is 20 percent, then $100 of new reserves can generate c. $500 of new money in the economy.
If the reserve ratio is 2.5 percent, then the money multiplier is a. 40
If the reserve ratio is 4 percent, then $81,250 of new money can be generated by b. $3,250 of new reserves.
If the reserve ratio is 100 percent, then a new deposit of $500 into a bank account b. leaves the size of the money supply unchanged.
If there is a shortage of loanable funds, then a. the quantity demanded is greater than the quantity supplied and the interest rate will rise.
If there is shortage of loanable funds, then c. neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the
interest rate rises to equilibrium.
If there is surplus of loanable funds, then d. neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the
interest rate falls to equilibrium.
If there is a surplus of loanable funds, then c. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is
If Y and M are constant, and V doubles, the quantity equation implies that the price level b. doubles.
If you are convinced that stock prices are impossible to predict from available information, then you probably also believe that b. the stock market is informationally
If you deposit $100 of currency into a demand deposit at a bank, this action by itself a. does not change the money supply.
If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs. b. These purchases are called capital investment. If
you raise the funds from others to purchase them you are a borrower.
If you were told that someone you knew nothing else about had just become unemployed, your best guess would be c. that they would be unemployed for a short time, even
though most of the unemployed theyve joined have been unemployed for a long time.
Iggie took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the
price index was 50 in 1974 and 180 in 2003, then what is Iggie's 2003 salary in 1974 dollars? a. $13,888.89
In 2002 mortgage rates fell and mortgage lending increased. Which of the following could explain both of these changes? c. The supply of loanable funds shifted right.
In 2002, the demand for construction workers increased and the demands for textile and steel workers diminished. This is an example of c. frictional unemployment created
by sectoral shifts.
In 2005, the Wall Street Journal reported that researchers in an interdisciplinary field called neuroeconomics had concluded a study that suggests that d. people with certain
kinds of brain disorders may make better financial decisions than other people.
In 2007, Angel Foods produced 300,000 bags of tortilla chips, employing 12,000 hours of labor b. was unchanged.
In 2008, XYZ Corporation had total earnings of $200 million and 50 million shares of the corporations c. $80
In a closed economy, national saving is b. equal to investment.
In a fractional-reserve banking system, a decrease in reserve requirements a. increases both the money multiplier and the money supply.
In a system of 100-percent-reserve banking, a. banks do not make loans.
In addition to a. performing financial intermediation, banks are important in that they help create a medium of exchange.
In an economy where net exports are zero, if saving rises in some period, then in that period b. consumption falls and investment rises.
In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct? c. The value of the consumer price index is
always 100 in the base year.
In countries that experience political instability, standards of living tend to be low because of c. lack of respect for property rights.
In examining the national income accounts of the closed economy of Nepotocracy b. this year but not last year
In medieval Europe an important technological advance was the use of the padded horse collar for a. public good.
In the 1800s, Europeans purchased stock in American companies that used the funds to build railroads and factories. The Europeans who did this engaged in a. foreign portfolio
In the 19th century, when crop failures often led to bank runs, banks would maked. decreased both the money multiplier and the money supply.
In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the largest? b. food & beverages
In the early 1900s, Henry Ford introduced a. a high-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory.
In the first part of this decade the U.S. government went from a surplus to a deficit. Other things the same, this means the b. supply of loanable funds shifted to the left
In the long run, a higher saving rate c. increases the level of productivity.
In the long run, an increase in the saving rate b. raises the levels of both productivity and income.
In the United States, as measured by real GDP per person, average income is about how many times as high as average income a century ago? d. 8
In the small closed economy of San Lucretia, the currency is the denar a. 270 billion denars, 50 billion denars
In the United States, real interest rates were d. low in the 1970s and high in the 1990s.
In the U.S., each additional year of schooling has historically raised a person's wage on average by about c. 10 percent.
In the U.S., people are required to pay taxes on a. nominal interest earnings, irrespective of their real interest earnings .
In the U.S., taxes on capital gains are computed using a. nominal gains. This is one way by which higher inflation discourages saving
In which of the following countries has economic growth been sufficiently strong in recent history d. Singapore
In which of the following games is it conceivable that a risk-averse person might be willing to play? c. a game where she has a 60 percent chance of winning $1 and a 40
percent chance of losing $1
Industrial machinery is an example of d. All of the above are correct.
Industrial machinery is an example of d. All of the above are correct.
Inflation is b. more about the value of money than about the value of goods.
Investment from abroad d. All of the above are correct.
Ipo did not work last week because flooding forced an evacuation of her workplace. The Bureau of Labor Statistics counts Ipo as c. employed and in the labor force.
Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in 2006. Janelles 2006 salary a. $39,097.74.
Jerry has the choice of two bonds, one that pays 3 percent interest and one that pays 6 percent interest. Which of the following is most likely? c. The 6 percent bond has a
longer term than the 3 percent bond.
Just after World War II, the labor-force participation rate of women was b. about 33 percent, and in 2007, it was about 60 percent.
Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics? b.
only Curly Corporations
Last year, Tealandia produced 50,000 bags of green tea, and tea was the only good Tealandia produced b. 5
Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 d. 2 percent
Lucretia puts $400 into an account when the interest rate is 10 percent. Later she checks her balance and finds it's worth about $708.62. How many... b. 6 years
M1 equals currency plus demand deposits plus c. traveler's checks plus other checkable deposits.
M1 includes d. All of the above are correct.
Manufacturers of Weightbegone are concerned that genetic advances in weight control might a. firm-specific risk, which will likely raise shareholders demand for higher
Mary looks over reports on four of her workers. Jack made 25 baskets in 5 hours b. Walter
Matilda just graduated from college. In order to devote all her efforts to college, she didnt hold a job d. and the labor-force participation rate are both unaffected.
Menu costs refers to d. the cost of more frequent price changes induced by higher inflation.
Minimum-wage laws, unions, and efficiency wages contribute to a. both structural unemployment and the natural rate of unemployment
Money demand depends on a. the price level and the interest rate.
Most economists believe that monetary neutrality provides d. a good description of the long run, but not the short run.
Most spells of unemployment are c. short, but most unemployment observed at any given time is long term.
National defense and knowledge are generally considered to be b. public goods.
Of the following groups, who is eligible for unemployment insurance benefits? b. the unemployed who were laid off because their previous employers no longer needed
On the basis of theory and empirical evidence, economists have reached several conclusions about economic growth. Which of the following is not one of these conclusions? a.
A relatively simple way to increase growth rates permanently is to increase a country's saving rate.
One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI a. fails to measure all changes in the quality
Other things the same, as the maturity of a bond becomes longer, the bond will pay c. a higher interest rate because it has more risk.
Other things the same, a country that increases its saving rate increases a. its future productivity and future real GDP.
Other things the same, a higher interest rate induces people to a. save more, so the supply of loanable funds slopes upward.
Other things the same, if the government increases transfer payments to households, then the effect of this on the governments budget b. will make the rate of interest rise.
Other things the same, if a country raises its saving rate, then in the long run b. the level of real GDP is higher but the growth rate of real GDP is unchanged.
Other things the same, which bond would you expect to pay the lowest interest rate? a. a bond issued by a state with a very good credit rating
Over the past 100 years, U.S. real GDP per person has doubled about every 35 years. If, in the next 100 years, it doubles every 25 years, then a century from now U.S. real GDP
per person will be d. 16 times higher than it is now.
Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has c. gradually decreased
Phillip is a mortgage broker, who is paid by commission c. pay higher returns when interest rates rise and lower returns when interest rates fall
Pekelo owns his own business. The Bureau of Labor Statistics counts Pekelo as c. employed and in the labor force.
People go to the bank more frequently to reduce currency holdings when inflation is high c. shoeleather cost.
People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as b. structurally
Pollee is the CEO of a corporation that hires nonunion labor. According to the theory of efficiency wages, if she decides to pay her workers more than the competitive
equilibrium wage, then a. the profits of her firm might increase
Productivity is the a. key determinant of living standards, and growth in productivity is the key determinant of growth in living standards.
Proprietary technology is knowledge that is d. known only by the company that discovered it.
Providing training for unemployed individuals is primarily intended to reduce a. frictional unemployment.
Quinn, the CEO of a corporation operating in a relatively poor country where wages are low a. might increase profits if it means that the wage is high enough for her
workers to eat a nutritious diet that makes them more productive
Recent entrants into the labor force account for about c. 1/3 of those who are unemployed.
Reserve requirements are regulations concerning b. the amount of reserves banks must hold against deposits.
Risk c. Both A and B are correct.
Robert put $15,000 into an account with a fixed interest rate two years ago and now the account b. 5.5 percent
Roger determines that if Aim Corporation has high revenues, then Zest Corporation will have low revenues, and that if Aim Corporation has low revenues, Zest Corporation will
have high revenues. He buys stock in both corporations. a. He has reduced firm-specific risk but not market risk.
Rosie is risk averse and has $1,000 with which to make a financial investment. She has three options a. option A.
Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2006 salary in 2001 dollars is c.
$64,000; thus, Ruben's purchasing power increased between 2001 and 2006.
Refer to Scenario 24-3. Gretta Gants 2005 income in 1944 dollars is b. $20,086.96.
Refer to Scenario 24-3. In real terms, Gretta Gants income amounts to about what percentage of Grant Gants income? b. 167 percent
Refer to Scenario If 25-1. the production function has the constant-returns-to-scale property, then if we know the values of A, K/L, H/L, and N/L, we also know the value of b.
Refer to Scenario 26-1. For this economy, government purchases amount to c. $28,000.
Regulations on the b. minimum amount of reserves that banks must hold against deposits are called reserve requirements.
Shoeleather cost refers to c. resources used to maintain lower money holdings when inflation is high.
Sirius has just finished high school and started looking for his first job, but has not yet found one. Other things the same, the unemployment rate a. and the labor-force
participation rate both increase
Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will b. demand funds from the
financial system by selling bonds.
Stock in Tasty Greens Restaurants is selling at $80 per share with 1 million shares outstanding. Last year, Tasty Greens earned $5 million, of which it retained $1 million for
future investments. The dividend yield on the stock is d. 5 percent
Suppose a bank has a 10 percent reserve requirement, $4,000 in deposits loaned out all it can given the reserve requirement. b. It has $400 in reserves and $3,600 in loans.
Suppose a country reduces trade restrictions. This country would be pursing an c. outward policy, which most economists believe has beneficial effects on the economy.
Suppose a country has a consumption tax that is similar to a state sales tax c. The interest rate would increase and saving would decrease.
Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds? b. The interest rate and investment would rise.
Suppose some country had an adult population of about 25 million, a labor-force participation rate of 60 percent, and an unemployment rate of 6 percent. How many people
were employed? b. 14.1 million
Suppose the economy is closed and consumption is 6,500, taxes are 1,500, and government purchases are 2,000. If saving amounts to 1,000, then what is GDP? a. 9,500
Suppose that because of the popularity of the low-carb diet, bakeries need fewer workers and steak houses need more workers. This is an example of b. frictional
unemployment created by sectoral shifts.
Suppose that grocery clerks and nurses are not unionized. If the nurses unionize, then d. the wages of nurses will rise and the wages of grocery clerks will fall.
Suppose that a large number of men who used to work or seek work now no longer do either. Other things the same, this makes c. both the number of people unemployed
and the labor force fall
Suppose the interest rate is 7 percent. Consider four payment options: Option A: $500 today. Option B: $550 one year from today Which of the payments has the lowest
present value today? d. Option D
Suppose that there are diminishing returns to capital. Suppose also that two countries are the same except one has more capital per worker and so it has more real GDP per
worker than the other b. the country that started with less capital per worker will grow faster.
Suppose that a country increased its saving rate. In the long run it would have b. higher productivity, but another unit of capital would increase output by less than before.
Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500 equal 2,000. What is national saving? c. 1,500
Suppose that monetary neutrality and the Fisher effect both hold and the money supply growth rate has been the same for a long time. Other things the same a higher money
supply growth would be associated with a. both higher inflation and higher nominal interest rates.
Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply b. the inflation rate but not the growth rate of real GDP.
Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases a. the inflation rate and the nominal interest rate by
the same number of percentage points.
Suppose that Thom experiences a greater loss in utility if he loses $50 than he would gain in utility if he wins $50. This implies that Thoms a. marginal utility diminishes as
wealth rises, so he must be risk averse
Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that d. the dollar value of savings increased at 8 percent,
and the purchasing power of savings increased at 5 percent.
Suppose that Slovenia undertakes a policy to increase its saving rate. This policy will likely c. lead to higher GDP growth for a period of several decades.
Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the d. demand for
existing shares of the stock and the price will both fall.
Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the d. demand for
existing shares of the stock and the price will both fall.
Suppose over the last year that the price of iron ore increased from $1,200 a ton to $1,300 a ton. Over the same time a measure of the overall price level increased from 168 to
187. The price of iron ore increased by a. less than inflation, and this means it became relatively less scarce.
Suppose you are deciding whether or not to buy a particular bond c. $7,472.58.
Suppose you put $500 into a bank account today. Interest is paid annually and the annual interest rate is 5.5 percent.
The future value of the $500 is c. $653.48 after 5 years and $854.07 after 10 years
Refer to Table 24-1. The cost of the basket in 2006 was c. $240
Refer to Table 24-1. If 2005 is the base year, then the CPI for 2005 was b. 100
Refer to Table 24-2. If 2009 is the base year, then the CPI for 2009 was b. 100
Refer to Table 24-4. The cost of the basket in 2006 was b. $130
Refer to Table 24-4. If the base year is 2004, then the CPI a. increased from 2004 to 2005 and increased from 2005 to 2006.
Refer to Table 24-5. If the base year is 2006, then the economys inflation rate in 2007 is b. 25 percent
Refer to Table 26-1. What was Hershey's earnings per share? b. $1.64
Refer to Table 28-1. The labor force of Wrexington in 2006 was b. 1800
Refer to Table 28-1. The number of adults not in the labor force of Wrexington in 2006 was b. 1400
Refer to Table 28-1. The unemployment rate of Wrexington in 2004 was b. 12.5%.
Refer to Table 28-1. The unemployment rate of Wrexington b. increased from 2004 to 2005 and decreased from 2005 to 2006
Refer to Table 28-1. The number of adults not in the labor force of Wrexington a. increased from 2004 to 2005 and increased from 2005 to 2006.
Refer to Table 28-2. What was Wrexingtons unemployment rate in 2009? b. 12.7 percent
Refer to Table 28-2. How many people were not in Wrexingtons labor force in 2009? c. 7,400
Refer to Table 28-2. What was Wrexingtons labor-force participation rate in 2009? b. 63 percent
Refer to Table 28-3. What is the adult female unemployment rate in Meditor? c. 7.1 percent
Refer to Table 28-3. What is the adult labor force in Meditor? a. 90 million
Refer to Table 28-3. What is the adult unemployment rate in Meditor? b. 6.25 percent
Refer to Table 28-3. What is the adult male population in Meditor? d. 135 million
Refer to Table 28-3. What is the adult female labor-force participation rate in Meditor? c. 66.7 percent
Refer to Table 28-4. What is the U-4 measure of labor underutilization? b. 6.9 percent
Refer to Table 29-3. Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Johnson City, and if the bank makes new loans so
as to keep its reserve ratio unchanged, then the amount of new loans that it makes will be b. $400.
Technological knowledge refers to b. available information on how to produce things.
The 12 regional Federal Reserve Banks b. regulate banks in their districts.
The agency responsible for regulating the money supply in the United States is c. the Federal Reserve.
The average amount of goods and services produced from each hour of a worker's time is called c. productivity
The Board of Governors b. has as its members individuals who are appointed by the president and confirmed by the Senate
The Bureau of Labor Statistics produces data on d. All of the above are correct.
The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market 60,000 households, called the d. Current Population Survey.
The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market from a regular survey of about c. 60,000 households.
The Bureau of Labor Statistics reported in 2005 that there were 28.19 million people over age 25 d. 45.3% and 8.1%
The catch-up effect refers to the idea that b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor.
The classical theory of inflation d. All of the above are correct.
The consumer price index was 225 in 2006 and 236 in 2007. The nominal this period was 6.5 percent. What was the real interest rate during this period? a. 1.6 percent
The country of Cedarland does not trade with any other country. Its GDP is $20 billion a. $5 billion
The country of Growpaw does not trade with any other country. Its GDP is $17 billion a. investment is $6 billion and consumption is $9 billion.
The country of Hykenia does not trade with any other country. Its GDP is $20 billion a. -$2 billion and $3 billion
The country of Meditor uses the merit as its currency a. 450 million merits and $150 million merits
The CPI is a measure of the overall cost of the goods and services bought by c. a typical consumer, and the CPI is computed and reported by the Bureau of Labor
The designation "natural" implies that the natural rate of unemployment d. does not go away on its own even in the long run.
The deviation of unemployment from its natural rate is called d. cyclical unemployment.
The efficiency-wage theory of worker health is a. more relevant for explaining unemployment in less developed countries than in rich countries.
The efficiency-wage theory of worker turnover suggests that firms with b. higher turnover will have higher production costs and lower profits.
The efficient markets hypothesis says that beating the market consistently is a. impossible. Many studies find that beating the market is, at best, extremely difficult.
The efficient markets hypothesis says that b. it should be difficult to find stocks whose price differs from their fundamental value.
The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called a. credit risk.
The federal funds rate is the d. interest rate at which banks lend reserves to each other overnight.
The financial system d. All of the above are correct
The GDP deflator reflects the b. current level of prices relative to the level of prices in the base year.
The inflation tax refers to a. the revenue a government creates by printing money.
The inputs used to produce goods and services are also called d. factors of production.
The introduction of a union into an industry d. raises wages and lowers employment in that industry.
The money multiplier equals b. 1/R, where R represents the reserve ratio for all banks in the economy
The money supply decreases if a. households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess
reserves and make fewer loans.
The National Labor Relations Board b. enforces workers' rights to unionize.
The opening of a new American-owned factory in Egypt would tend to increase Egypt's GDP more than it increases Egypt's GNP because d. All of the above are correct.
The present value of a payment to be made in the future falls as a. the interest rate rises and the time until the payment is made increases.
The performance of index funds c. provides evidence in support of the efficient markets hypothesis
The possibility of speculative bubbles in the stock market arises in part because c. future streams of dividend payments are very hard to estimate.
The president of a poor country has announced that he will implement the following measures whichb. 2
The president of Improvia, a developing country, proposes that his country needs to help domestic firms by imposing trade restrictions. d. These are inward-oriented policies
and most economists believe they would have adverse effects on growth in Improvia.
The price index was 128.96 in 2006, and the inflation rate was 24 percent between 2005 and 2006. The price index in 2005 was a. 104.
The relationship between the quantity of output created and the quantity of inputs needed to create it is called c. the production function.
The slope of the supply of loanable funds curve represents the a. positive relation between the real interest rate and investment.
The source of the supply of loanable funds a. is saving and the source of demand for loanable funds is investment.
The source of the supply of loanable funds is a. saving, and the source of the demand for loanable funds is investment.
The sum of which of the following must be equal to the adult population? c. employed, unemployed, not in the labor force
The traditional view of the production process is that capital is subject to c. diminishing returns.
The term inflation is used to describe a situation in which a. the overall level of prices in the economy is increasing.
The unemployment rate is computed as the number of unemployed a. divided by the labor force, all times 100.
There is a a. short-run tradeoff between inflation and unemployment
There is a clear consensus among economists that unions are d. None of the above is correct; there is no clear consensus among economists about whether unions are good
or bad for the economy.
To decrease the money supply, the Fed can c. sell government bonds or increase the discount rate.
To decrease the money supply, the Fed could d. All of the above are correct.
Today, bank runs are not a major problem for the U.S. banking system because d. the federal government now guarantees the safety of deposits at most banks.
Tonya put $250 into an account three years ago. The first year he earned 6 percent interest, the second year 7 percent, and the third year 8 percent. About how about much does
Tonya have in her account now? b. $306.23
U.S. Department of Labor data show that minimum-wage workers tend to be a. young and less educated.
U.S. Department of Labor data show that minimum-wage workers tend to be b. more likely to be working part time and in the leisure and hospitality industry.
Using the notation and production function in the text, Y/L is a. productivity.
Volume, as reported in stock tables, refers to the a. number of shares traded.
Waldo works eight hours and produces 7 units of goods per hour. Emerson works six hours and produces 10 units of goods per hour. c. Emersons productivity and output are
greater than Waldos.
What is the present value of a payment of $1,000 two years from now if the interest rate is 6%? b. $1000/(1.06)2
What is the present value of a payment of $100 to be made one year from today? b. $100/(1 + r)
When a country saves a larger portion of its GDP than it did before, it will have a. more capital and higher productivity.
When box office receipts are corrected for inflation, the most popular movie of all time is c. Gone With the Wind.
When he was 18, Gerald put $100 into an account at an interest rate of 8 percent. He now has $171.38 in this account. For how many years did Gerald his account? c. 7 years
When inflation causes relative-price variability, a. consumer decisions are distorted and the ability of markets to efficiently allocate factors of production is impaired.
When the Fed buys government bonds, b. the money supply increases and the federal funds rate decreases.
When the money market is drawn with the value of money on the vertical axis, b. money demand slopes downward and money supply is horizontal.
When the money market is drawn with the value of money on the vertical axis, an increase in the money supply b. increases the price level and decreases the value of money.
When the money market is drawn with the value of money on the vertical axis, an increase in the money supply causes the equilibrium value of money d. to decrease, while the
equilibrium quantity of money increases.
When the money market is drawn with the value of money on the vertical axis, an increase in the price level causes a d. movement to the right along the money demand
When the money market is drawn with the value of money on the vertical axis, the price level decreases if c. money demand shifts right or money supply shifts left.
When the price level falls, the number of dollars needed to buy a representative basket of goods c. decreases, so the value of money rises
When the price level rises, the number of dollars needed to buy a representative basket of goods b. increases, and so the value of money falls
When the relative price of a good increases, consumers respond by buying c. a smaller quantity of that good and a larger quantity of substitutes for that good.
When you rent a car, you might treat it with less care than you would if it were your own. This is an example of b. moral hazard
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 d. All of the above are correct.
Which entity within the U.S. government is responsible for computing and reporting the CPI? b. the Department of Labor
Which, if any, of the present values below are correctly computed? d. None of the above are correct to the nearest cent
Which of the following actions best illustrates adverse selection? d. A person intending to take up dangerous hobbies applies for life insurance.
Which of the following best describes the response of output as time passes to an increase in the saving rate? d. The growth rate of output increases, but diminishes to its
former level as time passes.
Which of the following best illustrates the human capital of a survivor stranded on an island? d. her previous training in a survival course
Which of the following best illustrates the concept of a store of value? c. You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies
Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level? d. All of the above are correct.
Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170? a. 80 to 100
Which of the following costs of inflation can be significant even if actual inflation and expected inflation are the same? d. All of the above are correct.
Which of the following counts as part of the supply of loanable funds? a. bank deposits and purchases of bonds
Which of the following defines an annuity? a. For a fee, an insurance company provides you with regular income until you die.
Which of the following does the Federal Reserve not do? c. convert Federal Reserve Notes into gold
Which of the following events could explain an increase in interest rates together with an increase in investment? b. The government institutes an investment tax credit.
Which of the following expressions must be equal to national saving for a closed economy? b. Y - C - G
Which of the following is a certificate of indebtedness? c. bonds but not stocks
Which of the following is a store of value? d. All of the above are correct.
Which of the following is an example of a renewable natural resource? d. All of the above are correct.
Which of the following is both a financial institution and a financial intermediary? a. banks
Which of the following is consistent with the catch-up effect? d. All of the above are correct.
Which of the following is consistent with the idea that high money supply growth leads to high inflation? a. the quantity theory and evidence from four hyperinflations
during the 1920s
Which of the following is not an explanation for the existence of unemployment in the long run? d. the business cycle
Which of the following is not correct? d. If you had information about a corporation that no one else had, you could earn a very high rate of return. This contradicts the
efficient market hypothesis.
Which of the following is not correct? c. Insurance markets reduce risk, but not by diversification.
Which of the following is correct? d. Index funds typically have a higher rate of return than managed funds. This tends to support the efficient market hypothesis.
Which of the following is correct? b. The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.
Which of the following is correct? a. Some bonds have terms as short as a few months.
Which of the following is a correct way to measure productivity? b. Divide the quantity of output by the number of hours worked.
Which of the following is the most accurate statement about the effects of quality change on the CPI? a. Even though the BLS adjusts the prices of products in the CPI
basket when the quality of the products change, changes in quality are still a problem because quality is so hard to measure.
Which of the following is the correct way to compute the future value of $100 put into an account that earns 4 percent interest for 10 years? d. $100(1 + .04)10
Which of the following is the correct way to compute the future value of $X that earns r percent interest for N years? b. $X(1 + r)N
Which of the following is correct? a. The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some
degree of unemployment is inevitable in a complex economy.
Which of the following is correct? c. Unemployment Rate = number of unemployed (number of employed + number of unemployed) 100.
Which of the following is correct? b. Unions raise wages above the competitive equilibrium level
Which of the following is correct? Inflation a. impedes financial markets in their role of allocating resources.
Which of the following is not an explanation for the existence of unemployment in the long run? d. the business cycle
Which of the following is not correct? c. The ranking of countries by average income changes very little over time.
Which of the following is not correct? b. Unions play a much larger role in the U.S. labor market now than they did in the past
Which of the following is not correct? d. Diversification can eliminate market risk but not firm-specific risk.
Which of the following is not correct? d. Purchases of capital goods are excluded from GDP.
Which of the following is not correct? c. Minimum wages are the predominant reason for unemployment in the U.S. economy
Which of the following is not correct? b. Minimum-wage laws affect all workers.
Which of the following does not help reduce frictional unemployment? c. unemployment insurance
Which of the following lists correctly identifies the four expenditure categories of GDP? a. consumption, government purchases, investment, net-exports
Which of the following lists two things that both increase the money supply? c. lower the discount rate, make open market purchases
Which of the following statements best describes the economists view of finance and the financial system? a. The financial system is very important to the functioning of
the economy, and the tools of finance are often helpful to us as individuals when we find ourselves making certain decisions.
Which of the following statements is correct? c. People who have credit cards probably hold less money on average than people who do not have credit cards.
Which of the following statements is correct? b. Most buyers of stocks and bonds prefer those issued by large and familiar companies.
Which of the following statements is correct? b. When a corporation sells bonds as a means of raising funds it is engaging in debt finance.
Which of the following statements is correct? In 2006, d. All of the above are correct.
Which of the following statements is not correct? c. Malthus argued that charity and government aid was an effective way to reduce poverty.
Which of the following would a macroeconomist consider as investment? c. Mariah builds a new coffee shop.
Which of the following would be human capital and physical capital, respectively? c. for a restaurant, the chefs knowledge about preparing food and equipment in the
Which is the most accurate statement about the GDP deflator and the consumer price index? b. The consumer price index compares the price of a fixed basket of goods and
services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same
goods and services in the base year.
When the overall level of prices in the economy is increasing, economists say that the economy is experiencing c. inflation.
Who of the following would be included in the Bureau of Labor Statistics unemployed category? b. Halim, who is on temporary layoff
With the value of money on the vertical axis, the money supply curve is d. vertical
Workland has a population of 10,000, of whom 7,000 work 8 hours a b. Workland has higher productivity but lower real GDP per person than Laborland.
You bake cookies. One day you double the time you spend, double the number of chocolate chips c. constant returns to scale.
You bought some shares of stock and, over the next year, the price per share increased by 5 percent and the price level increased by 8 percent. Before taxes, you experienced c.
a nominal gain and a real loss, and you paid taxes on the nominal gain.
You have been promised a payment of $400 in the future. In which case is the present value of this payment highest? a. You receive the payment 4 years from now and the
interest rate is 4 percent.
You hold bonds issued by the state of Ohio. The interest you earn each year on these bonds b. is not subject to federal income tax and so these bonds pay a lower interest
rate than otherwise comparable bonds issued by the U.S. government.
You observe a closed economy that has a government deficit and positive investment. Which of the following is correct? b. Private saving is positive; public saving is
You receive $500 today which you plan to save for two years c. $500 + $500/(1.05)2
You want to have $100,000 in five years. If the interest rate is 8 percent, about how much do you need to have today? c. $68,058.32
Yves is an unpaid worker in his familys bakery. The Bureau of Labor Statistics counts Yves as c. employed and in the labor force.