QN=1 (17737) Refer to Table 3-2.

Aruba’s opportunity cost of one cooler is

(2215
)

a. 0.4 radio and Iceland’s opportunity cost of one cooler is 0.25 radio.
b. 0.4 radio and Iceland’s opportunity cost of one cooler is 4 radios.
c. 2.5 radios and Iceland’s opportunity cost of one cooler is 0.25 radio.
d. 2.5 radios and Iceland’s opportunity cost of one cooler is 4 radios.

QN=2 (2218) (17722) Which of the following is not correct?

a. The producer who requires a smaller quantity of inputs to produce a good is said to
have an absolute advantage in producing that good.
b. The producer who gives up less of other goods to produce Good X has the smaller
opportunity cost of producing Good X.
c. The producer who has the smaller opportunity cost of producing a good is said to have
a comparative advantage in producing that good.
d. The gains from specialization and trade are based not on comparative advantage but
on absolute advantage.

QN=3 (2222) (17725) Adam Smith

a. and David Ricardo both opposed free trade.
b. opposed free trade, but David Ricardo supported it.
c. supported free trade, but David Ricardo opposed it.
d. and David Ricardo both supported free trade.

QN=4 (2213) (17718) People who provide you with goods and services
a. are acting out of generosity.
b. do so because they get something in return.
c. have chosen not to become interdependent.
d. are required to do so by the government.

QN=5 (2210) (17726) Which famous economist developed the principle of comparative advantage as
 we know it today?
a. Adam Smith
b. David Ricardo
c. John Maynard Keynes
d. Milton Friedman

QN=6 (2259) (17783) Which of the following items is counted as part of government purchases?
a. (i) The federal government pays the salary of a Navy officer.
b. (ii) The state of Nevada pays a private firm to repair a Nevada state highway.
c. (iii) The city of Las Vegas, Nevada pays a private firm to collect garbage in that city.
d. All (i), (ii), and (iii) are correct.

QN=7 (2255) (17784) In the economy of Wrexington in 2008, consumption was 60% of GDP,
government purchases were $212, imports were $67 and 67% of the value of exports,
investment was one-half of the value of consumption. What was Wrexington’s GDP in
2008?
a. $1450
b. $1790
c. $2450
d. $2790

QN=8 (2261) (17780) In 2007, Corny Company grows and sells $2 million worth of corn to Tasty
Cereal Company, which makes corn flakes. Tasty Cereal Company produces $6 million
worth of corn flakes in 2007, with sales to households during the year of $4.5 million.
The unsold $1.5 million worth of corn flakes remains in Tasty Cereal Company’s
inventory at the end of 2007. The transactions just described contribute how much to
GDP for 2007?
a. $4.5 million
b. $6 million
c. $6.5 million
d. $8 million

QN=9 (2264) (17788) Which of the following statements is correct?

a. The value of intermediate goods is always included in GDP.
b. The value of intermediate goods is included in GDP only if those goods were produced
in the previous year.
c. The value of intermediate goods is included in GDP only if those goods are added to
firms’ inventories to be used or sold at a later date.
d. The value of intermediate goods is never included in GDP.

QN=10 (2242) (17730) Assume for Namibia that the opportunity cost of each hut is 200 bowls. Then
which of these pairs of points could be on Namibia's production possibilities frontier?
a. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls)
b. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls)
c. (300 huts, 50,000 bowl) and (200 huts, 60,000 bowls)
d. (300 huts, 60,000 bowls) and (200 huts, 80,000 bowls)

QN=11 (2270) (17785) In the economy of Wrexington in 2008, nominal GDP was $20 billion and the
GDP deflator ratio was 500. What was Wrexington’s real GDP in 2008?
a. $2.5 million
b. $10 million
c. $40 million
d. $100 million

QN=12 (2287) (17798) The consumer price index tries to gauge how much incomes must rise to
maintain
a. an increasing standard of living.
b. a constant standard of living.
c. a decreasing standard of living.
d. the highest standard of living possible.

QN=13 (2295) (17797) Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York,
where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does
the New York job have to pay in order for the two salaries to represent the same
purchasing power?
a. $23,040
b. $52,000
c. $79,200
d. $100,000

QN=14 (2290) (17809) The GDP deflator reflects the

a. level of prices in the base year relative to the current level of prices.
b. current level of prices relative to the level of prices in the base year.
c. level of real output in the base year relative to the current level of real output.
d. current level of real output relative to the level of real output in the base year.

QN=15 (2277) (17777) Def01 stands for GDP deflator in year 1. Def02 stands for GDP deflator in year
2. The inflation rate in year 2 equals
a. 100*(Def02-Def01)/Def01.
b. 100*(Def02-Def01)/Def02.
c. 100*(Def01-Def02)/Def01.
d. 100*(Def01-Def02)/Def02.

QN=16 (2322) (17839) The level of real GDP person

a. differs widely across countries, but the growth rate of real GDP per person is similar
 across countries.
b. is very similar across countries, but the growth rate of real GDP per person differs
widely across countries.
c. and the growth rate of real GDP per person are similar across countries.
d. and the growth rate of real GDP per person vary widely across countries.

QN=17 (2309) (17828) If an economy with constant returns to scale were to double its physical
capital stock, its available natural resources, and its human capital, but leave the size
of the labor force the same,
a. (i) its output would stay the same and so would its labor productivity.
b. (ii) its output and labor productivity would increase, but less than double.
c. (iii) its output and labor productivity would increase by more than double.
d. None of (i), (ii), and (iii) is correct.

QN=18 (2298) (17805) Economists use the term inflation to describe a situation in which
a. some prices are rising faster than others.
b. the economy's overall price level is rising.
c. the economy's overall price level is high, but not necessarily rising.
d. the economy's overall output of goods and services is rising faster than the economy's
overall price level.

QN=19 (2312) (17846) The Peapod Restaurant uses all of the following to produce vegetarian meals.
Which of them is an example of physical capital?
a. the owner's knowledge of how to prepare vegetarian entrees
b. the money in the owner's account at the bank from which she borrowed money
c. the tables and chairs in the restaurant
d. the land the restaurant was built on

QN=20 (2310) (17825) If a production function has constant returns to scale, output can be doubled if
a. (i) labor alone doubles.
b. (ii) all inputs but labor double.
c. (iii) all of the inputs double.
d. None of (i), (ii), and (iii) is correct.

QN=21 (2341) (17859) People who buy newly issued stock in a corporation such as Crate and Barrel
provide
a. debt finance and so become part owners of Crate and Barrel.
b. debt finance and so become creditors of Crate and Barrel.
c. equity finance and so become part owners of Crate and Barrel.
d. equity finance and so become creditors of Crate and Barrel.

QN=22 (2354) (17860) If the government instituted an investment tax credit, then which of the
 following would be higher in equilibrium?
a. saving and the interest rate
b. saving but not the interest rate
c. the interest rate but not saving
d. neither saving nor the interest rate

QN=23 (2332) (17821) 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
a. 4 times higher than it is now.
b. 8 times higher than it is now.
c. 12 times higher than it is now.
d. 16 times higher than it is now.

QN=24 (2345) (17862) Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to
2,500 consumption equals 7,500 and government purchases equal 2,000. What are
private saving, public saving, and national saving?
a. (i) 1,500, 1,000, and 500, respectively
b. (ii) 1,000, 500, and 1,500, respectively
c. (iii) 500, 1,500, and 1,000, respectively
d. None of (i), (ii), and (iii) is correct.

QN=25 (2326) (17847) Scenario 25-1.

An economy’s production form takes the form Y = AF(L, K, H, N)

Refer to Scenario 25-1. If the production function has the constant-returns-to-scale

property, and output is zero whenever some input is zero, then it is possible that the
specific form of the production function is
a. Y = 4L + 2K + 3H + N
b. Y = (L + K + H + N)/4
c. Y =2(LKHN)^0.25
d. Y = 4(L^3 × K^4 × H × N)^0.5

QN=26 (2380) (17899) Which of the following does not help reduce frictional unemployment?
a. (i) government-run employment agencies
b. (ii) public training programs
c. (iii) unemployment insurance
d. All of (i), (ii), and (iii) help reduce frictional unemployment.

QN=27 (2378) (17875) In one year, you meet 52 people who are each unemployed for one week and
eight people who are each unemployed for the whole year. Normally there are 52
weeks in a year. What percentage of the unemployment spells you encountered was
short-term, and what percentage of the unemployment you encountered in a given
 week was long-term?
a. 52 percent and 13.3 percent
b. 52 percent and 88.9 percent
c. 86.7 percent and 13.3 percent
d. 86.7 percent and 88.9 percent

QN=28 (2365) (17887) 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 unemployed?
a. 0.846 million
b. 0.9 million
c. 1.5 million
d. 6 million

QN=29 (2384) (17880) The labor-force participation rate measures the percentage of the
a. total adult population that is in the labor force.
b. total adult population that is employed.
c. labor force that is employed.
d. labor force that is either employed or unemployed.

QN=30 (2371) (17882) Suppose that efficiency wages become more common in the economy.
Economists would predict that this would
a. increase the quantity demanded and decrease the quantity supplied of labor, thereby
decreasing the natural rate of unemployment.
b. decrease the quantity demanded and increase the quantity supplied of labor, thereby
increasing the natural rate of unemployment.
c. increase the quantity demanded and decrease the quantity supplied of labor, thereby
increasing the natural rate of unemployment.
d. decrease the quantity demanded and increase the quantity supplied of labor, thereby
decreasing the natural rate of unemployment.

QN=31 (2369) (17879) Suppose some country had an adult population of about 50 million, a labor-
force participation rate of 60 percent, and an unemployment rate of 5 percent. How
many people were employed?
a. 1.5 million
b. 28.5 million
c. 30 million
d. 47.5 million

QN=32 (2388) (17908) An increase in the money supply might indicate that the Fed had
a. purchased bonds in an attempt to increase the federal funds rate.
b. purchased bonds in an attempt to reduce the federal funds rate.
c. sold bonds in an attempt to increase the federal funds rate.
d. sold bonds in an attempt to reduce the federal funds rate.

QN=33 (2399) (17914) Which of the following functions of money is also a common function of most
other financial assets?
a. (i) a unit of account
b. (ii) a store of value
c. (iii) medium of exchange
d. None of (i), (ii), and (iii) is correct.

QN=34 (2402) (17916) Which of the following is not included in M1?

a. Currency
b. demand deposits
c. savings deposits
d. travelers' checks

QN=35 (2431) (17950) Tara deposits money into an account with a nominal interest rate of 6 percent.
She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara’s after-tax real
rate of interest
a. will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if inflation
turns out to be higher than 2 percent.
b. will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if inflation
turns out to be higher than 2 percent.
c. will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if inflation
turns out to be higher than 2 percent.
d. will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if inflation
turns out to be higher than 2 percent.

QN=36 (2426) (17954) An increase in the price level makes the value of money
a. increase, so people want to hold more of it.
b. increase, so people want to hold less of it.
c. decrease, so people want to hold more of it.
d. decrease, so people want to hold less of it.

QN=37 (2444) (17930) When the money market is drawn with the value of money on the vertical axis,
a decrease in the price level causes a
a. movement to the right along the money demand curve.
b. movement to the left along the money demand curve.
c. shift to the right of the money supply curve.
d. shift to the left of the money supply curve.

QN=38 (2420) (17940) According to the classical dichotomy, which of the following is affected by
monetary factors?
a. (i) nominal wages
b. (ii) the price level
c. (iii) nominal GDP
d. All of (i), (ii), and (iii) are correct.

QN=39 (2423) (17944) When deciding how much to save, people care most about
a. after-tax nominal interest rates.
b. after-tax real interest rates.
c. before-tax real interest rates.
d. before-tax nominal interest rates.

QN=40 (2418) (17937) If P denotes the price of goods and services measured in terms of money,
then
a. (i) 1/P represents the value of money measured in terms of goods and services.
b. (ii) P can be interpreted as the inflation rate.
c. (iii) the supply of money influences the value of P, but the demand for money does
not.
d. All of (i), (ii), and (iii) are correct.

QN=41 (2448) (17974) If a country has negative net capital outflows, then its net exports are
a. positive and its saving is larger than its domestic investment.
b. positive and its saving is smaller than its domestic investment.
c. negative and its saving is larger than its domestic investment.
d. negative and its saving is smaller than its domestic investment.

QN=42 (2468) (17963) If the exchange rate is 50 Bangladesh taka per dollar and a bushel of rice costs
180 taka in Bangladesh and $3 in the United States, then the real exchange rate of the
US dollar is
a. greater than one and arbitrageurs could profit by buying rice in the United States and
selling it in Bangladesh.
b. greater than one and arbitrageurs could profit by buying rice in Bangladesh and selling
it in the United States.
c. less than one and arbitrageurs could profit by buying rice in the United States and
selling it in Bangladesh.
d. less than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in
the United States.

QN=43 (2456) (17959) One year a country has negative net exports. The next year it still has negative
net exports and imports have risen more than exports.
a. its trade surplus fell.
b. its trade surplus rose.
c. its trade deficit fell.
d. its trade deficit rose
QN=44 (2499) (18013) Refer to Figure 32-6. Which of the following shifts show the effects of an
import quota?

a. (i) shifting the middle supply curve in panel c to the one to its left.
b. (ii) shifting the demand curve from the right to the left in panel c.
c. (iii) shifting the demand curve from the left to the right in panel c.
d. None of (i), (ii), and (iii) is correct.

QN=45 (2492) (17996) Which of the following will decrease U.S. net capital outflow?
a. (i) capital flight from the United States
b. (ii) the government budget deficit increases
c. (iii) the U.S. imposes import quotas
d. None of (i), (ii), and (iii) is correct.

QN=46 (2517) (18039) Which of the following can explain the upward slope of the short-run
aggregate supply curve?
a. nominal wages are slow to adjust to changing economic conditions
b. as the price level falls, the exchange rate falls
c. an increase in the money supply lowers the interest rate
d. an increase in the interest rate increases investment spending

QN=47 (2507) (18021) Recessions in China and India would cause

a. the U.S. price level and real GDP to rise.
b. the U.S. price level and real GDP to fall.
c. the U.S. price level to rise and real GDP to fall.
d. the U.S. price level to fall and real GDP to rise.

QN=48 (2527) (18018) The aggregate quantity of goods and service demanded changes as the price
level falls because
a. real wealth rises, interest rates rise, and the dollar appreciates.
b. real wealth rises, interest rates fall, and the dollar depreciates.
c. real wealth falls, interest rates rise, and the dollar appreciates.
d. real wealth falls, interest rates fall, and the dollar depreciates.

QN=49 (2547) (18055) The economy is in long-run equilibrium. Suppose that automatic teller
machines become cheaper and more convenient to use, and as a result the demand
for money falls. Other things equal, we would expect that, in the short run,
a. the price level and real GDP would rise, but in the long run they would both be
unaffected.
b. the price level and real GDP would rise, but in the long run the price level would rise
and real GDP would be unaffected.
c. the price level and real GDP would fall, but in the long run they would both be
unaffected.
d. the price level and real GDP would fall, but in the long run the price level would fall
and real GDP would be unaffected.

QN=50 (2542) (18060) Other things the same, automatic stabilizers tend to
a. raise expenditures during expansions and recessions.
b. lower expenditures during expansions and recessions.
c. raise expenditures during recessions and lower expenditures during expansions.
d. raise expenditures during expansions and lower expenditures during recessions.
[id=2215, Mark=1]1. A

[id=2218, Mark=1]2. D

[id=2222, Mark=1]3. D

[id=2213, Mark=1]4. B

[id=2210, Mark=1]5. B

[id=2259, Mark=1]6. D

[id=2255, Mark=1]7. C

[id=2261, Mark=1]8. B

[id=2264, Mark=1]9. C

[id=2242, Mark=1]10. D

[id=2270, Mark=1]11. C

[id=2287, Mark=1]12. B

[id=2295, Mark=1]13. D

[id=2290, Mark=1]14. B

[id=2277, Mark=1]15. A

[id=2322, Mark=1]16. D

[id=2309, Mark=1]17. B

[id=2298, Mark=1]18. B

[id=2312, Mark=1]19. C

[id=2310, Mark=1]20. C

[id=2341, Mark=1]21. C

[id=2354, Mark=1]22. A

[id=2332, Mark=1]23. D

[id=2345, Mark=1]24. B

[id=2326, Mark=1]25. C

[id=2380, Mark=1]26. C

[id=2378, Mark=1]27. D

[id=2365, Mark=1]28. B

[id=2384, Mark=1]29. A
[id=2371, Mark=1]30. B

[id=2369, Mark=1]31. B

[id=2388, Mark=1]32. B

[id=2399, Mark=1]33. B

[id=2402, Mark=1]34. C

[id=2431, Mark=1]35. B

[id=2426, Mark=1]36. C

[id=2444, Mark=1]37. B

[id=2420, Mark=1]38. D

[id=2423, Mark=1]39. B

[id=2418, Mark=1]40. A

[id=2448, Mark=1]41. D

[id=2468, Mark=1]42. C

[id=2456, Mark=1]43. D

[id=2499, Mark=1]44. C

[id=2492, Mark=1]45. B

[id=2517, Mark=1]46. A

[id=2507, Mark=1]47. B

[id=2527, Mark=1]48. B

[id=2547, Mark=1]49. B

[id=2542, Mark=1]50. C